Washington was “clearly wrong” to assume China cannot make artificial intelligence chips, Nvidia CEO Jensen Huang said Wednesday, adding it is critical for US chips to be exported to the Chinese market and have Nvidia chips used to run open-source models like DeepSeek and Alibaba’s Qwen.
“The US has based its policy on the assumption that China cannot make AI chips. That assumption was always questionable, and now it’s clearly wrong,” said Huang during a first-quarter earnings call.
Huang spoke after the Financial Times reported the Trump administration has told US chip design tool makers to stop selling to China.
The CEO said whoever leads the AI market in China is “positioned to lead globally,” but that USD 50 billion market has been “effectively closed” to Nvidia and other US chip companies because of export controls.
“China’s AI moves on, with or without US chips… The question is not whether China will have AI, it already does. The question is whether one of the world’s largest markets will run on American platforms,” Huang added.
Nvidia launched the H20 chip for the Chinese market after the previous Biden administration tightened restrictions on AI chip exports to China early last year. However, the US government started requiring Nvidia to obtain licenses for exporting the H20 on April 9.
It said Washington’s latest chip export controls have led to an additional USD 4.5 billion charge in the three months ended in April, and it expected “meaningful decrease” in China data center revenue for the ongoing May-July quarter.
Nvidia sold USD 4.6 billion in H20 chips in China during the quarter before the new export licensing requirements, according to an earnings release for the first quarter.
China’s leading internet companies like ByteDance, Alibaba, and Tencent stockpiled billions of dollars in Nvidia H20 chips this year ahead of the April ban amid mounting geopolitical uncertainties.
“The new export controls on H20 did not provide a grace period to allow us to sell through our inventory,” said Nvidia CFO Colette Kress at the earnings call, adding the company was unable to ship USD 2.5 billion of H20 chips during the quarter.
While the company managed to soften the blow by reusing certain materials, Washington’s latest H20 curb proved costly.
“We are still evaluating our limited options to supply data center compute products [in China] compliant with the US government’s revised export control rules,” Kress said.
Nikkei Asia previously reported the US AI chip leader is preparing new chips for the China market including a Blackwell chip that will come with GDDR7 memory, not HBM, to comply with export restrictions.
“The key is to understand the limits and see what we can come up with, interesting products that could continue to serve the Chinese market,” Huang said.
Meanwhile, the emergence of cost-effective, Chinese-made DeepSeek AI has raised questions around the billions of dollars poured into data centers and other AI computing infrastructure that drove sales.
Huang said the rise of reasoning AI models like DeepSeek have led to more computing needs, as they require longer thinking and more token generation, which will drive up demand for Nvidia chips.
The Nvidia CEO called DeepSeek and Alibaba’s Qwen model “among the best open-source AI models released freely,” which have gained traction across the US, Europe, and elsewhere.
“DeepSeek also underscores the strategic value of open source AI,” Huang said. “US platforms must remain the preferred platform for open-source AI, that means supporting collaboration with top developers globally, including in China.”
“America wins when models like DeepSeek and Qwen run best on American infrastructure,” he added.
For the three months ended April 27, Nvidia reported a 69% year-on-year revenue jump to USD 44.1 billion. Its main revenue driver, data centers, jumped 73% on the year to USD 39.1 billion.
For the ongoing quarter, company-wide revenue is expected to be USD 45 billion, plus or minus 2%, which reflects a loss of around USD 8 billion in H20 revenue.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.