To The Moon

$NVIDIA(NVDA)$

We’ve just gotten some huge news that Nvidia investors need to know about. The U.S. government has imposed new and more expansive restrictions on Nvidia’s ability to export chips to China and several other countries—adding a major twist to Nvidia’s international business strategy and potentially affecting billions of dollars in sales.

In this articles, I’m going to unpack exactly what the U.S. government is doing, how Nvidia is responding, the financial implications for the upcoming quarter, and why I believe this might be a short-term headwind rather than a long-term setback for the company. I’ll also explain why Nvidia is planning to take a $5.5 billion charge in this quarter—what that number really means—and how it plays into a larger strategic picture, especially when it comes to tax optimization and financial reporting.

I also want to touch on how this news affects Nvidia’s valuation, how Wall Street is reacting, and ultimately whether or not I still think Nvidia deserves to be on the list of my Top Stocks to Buy in 2025. Spoiler alert: I do. But the reasons why are important to understand, especially in light of these new restrictions.

The New Restrictions: What Changed?

So what exactly happened?

On April 9th, 2025, Nvidia announced that the U.S. government notified them of a significant change in export policy. Moving forward, Nvidia will need to obtain a special export license in order to sell certain chips to China—including Hong Kong and Macau—and to other regions classified under the D5 designation. This also applies to any company headquartered in those regions or controlled by a parent company based there.

Specifically, these restrictions apply to Nvidia’s H20 integrated circuits, which were previously the lowest-tier AI-capable chips Nvidia could still sell to China without restrictions. These chips are designed to skirt previous export bans by offering slightly less power or capability, just enough to stay under the regulatory radar.

Now, even that door has effectively been closed.

The language from the U.S. government is that Nvidia can still “apply for a license” to export these chips—but based on the tone and broader political context, it doesn’t look like those licenses will be granted. This isn’t just bureaucracy. It’s part of a broader strategic move by the U.S. government to slow China’s development of high-end AI infrastructure and maintain a technological edge.

Why This Matters: H20 Was the Last Permitted Chip

This is crucial: the H20 was Nvidia’s fallback plan—its least advanced AI chip still permitted for export to China. So when previous restrictions blocked the A100 and H100 chips, Nvidia quickly pivoted and started offering these slightly watered-down versions like the H20 to keep sales going.

That strategy worked for a while. China remained a meaningful part of Nvidia’s revenue stream—even if growth was slowing—and the company could still find ways to serve that market within the bounds of U.S. law.

Now, even that workaround is gone.

So what happens to all the H20 chips Nvidia already produced for Chinese customers? What happens to the multi-billion-dollar contracts it had in place for these exports?

The $5.5 Billion Charge

That brings us to the $5.5 billion charge Nvidia says it will take in the first fiscal quarter of 2026, which ends on April 27th. This charge reflects the cost of inventory that can no longer be shipped to China, purchase commitments, and other reserves tied to these now-restricted chips.

Essentially, Nvidia already manufactured and allocated billions of dollars worth of chips intended for Chinese buyers. But now, with the new restrictions, it can't fulfill those contracts. That’s what this $5.5 billion figure is referencing.

But here’s where it gets more nuanced. Despite that headline number, Nvidia made it clear that these chips are not obsolete. In fact, demand for Nvidia’s products is so strong globally that they are likely to find other buyers quickly—just maybe not at the same margins they were expecting from China.

Nvidia has publicly said its cutting-edge chips are completely sold out, and customers are lining up to buy whatever they can get, even if it's not the very latest generation.

So if the company can still sell the inventory elsewhere, why take the $5.5 billion charge?

Strategic Tax Planning

Here’s the smart play Nvidia is making—and it’s something sophisticated investors will appreciate.

By recognizing a $5.5 billion loss right now, Nvidia gets to reduce its taxable income for the quarter. This means it will pay less in taxes to governments around the world, including the U.S., based on a lower profit figure.

Even if Nvidia later resells that inventory, it will recognize new revenue in a future quarter, and pay taxes on it at that time. This gives the company the benefit of deferring tax liabilities and maximizing cash flow in the short term. It’s a great example of how large companies optimize their earnings reports to align with fiscal policy and shareholder interests.

This also explains why this hit is likely to be heaviest in Q1 and not repeated in future quarters.

Putting It in Perspective: How Much Does China Really Matter?

Let’s put some numbers around this.

In Nvidia’s most recently completed fiscal year (which ended in January 2025), the company generated $131 billion in total revenue. Out of that, $17.1 billion came from China, including Hong Kong.

That’s about 13% of total revenue. Not insignificant—but also not make-or-break.

And importantly, that number has been shrinking as the U.S. has gradually tightened export controls. For fiscal 2026, we can expect that percentage to drop further. Nvidia has already been pivoting toward data centers in the U.S., Europe, and the Middle East, and away from China—so this latest restriction is more of a continuation than a surprise.

Market Reaction and Valuation

Naturally, when the news hit, Nvidia stock sold off. Investors hate uncertainty, and geopolitical risk tends to rattle sentiment even more than earnings misses.

But here’s the silver lining: Nvidia’s forward price-to-earnings ratio is now sitting at around 22.84. That’s a significant contraction from previous valuations, especially when you consider the company’s growth rate, dominance in AI infrastructure, and pricing power.

For long-term investors, that valuation reset might actually be a buying opportunity—not a red flag.

Do I Still Like Nvidia Stock?

This is the question I’ve been getting nonstop since the announcement: “Do you still like Nvidia stock? Does this change your view?”

My answer: Yes, I still like Nvidia stock. It remains one of my Top Stocks to Buy in 2025.

Now, let’s be honest—this is a negative development. Nvidia will lose meaningful revenue and profit from a region that has historically been important. The company will need to adapt and may face margin pressure if it sells the same chips in other regions at lower prices.

But I’m encouraged by a few key things:

1. Global demand remains extremely strong. The chips that were intended for China will almost certainly find buyers elsewhere.

2. Nvidia is sold out of its most advanced technology. That level of demand gives the company enormous flexibility.

3. AI adoption is still in the early innings. Nvidia is the foundational hardware provider for this transformation.

4. The company is financially strong and strategically smart. This $5.5 billion charge shows Nvidia is thinking long-term, optimizing for tax and investor value.

Conclusion

So yes, this is a meaningful short-term challenge, and it will have an impact on the next quarter’s earnings. But long term, I believe Nvidia remains a category-defining company that will continue to grow as artificial intelligence becomes increasingly embedded in every major industry.

If anything, this kind of disruption creates opportunity—especially for investors who understand the bigger picture and aren't spooked by short-term noise.

Let me know in the comments what you think about these new restrictions. Are you buying Nvidia on this dip? Or do you think the China risk is too great?

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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