Nvidia’s Record Quarter Exposes the Cost of Global AI Dominance
Nvidia’s latest earnings reveal the growing cost of AI dominance in a world where performance must now compete with permission.
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Nvidia just delivered one of the most impressive quarters in corporate history.
A record $44.1 billion in revenue.
Data center sales up 73% year-over-year.
Adjusted earnings that beat expectations.
And a stock that jumped 6% in after-hours trading.
But buried beneath the headlines is a tectonic shift that too few are talking about.
Nvidia is beginning to decouple from China.
And that has profound implications not just for Nvidia, but for the future of global AI infrastructure.
1. The Quarter: Strength in the West, Fracture in the East
Let’s start with the numbers.
Nvidia posted $44.1 billion in revenue for Q1 FY2026, up 69% from a year ago and 12% from the prior quarter.
Its data center segment alone brought in $39.1 billion, accounting for nearly 90% of total revenue. Cloud giants like Microsoft, Amazon, and Google represented nearly half of those sales.
AI inference token generation (Nvidia’s proxy for deployed AI usage) grew 10x year-over-year.
Gaming revenue surged 42% to $3.8 billion, its best quarter ever, surpassing the COVID-19 and crypto mining booms.
The topline narrative is clear: AI demand is real, growing, and deeply embedded in enterprise infrastructure buildouts.
But the China story tells a different tale.
2. The Export Ban That Wiped $4.5 Billion
On April 9, 2025, the U.S. government informed Nvidia that its H20 chips, designed for the Chinese market, would require new export licenses.
The timing was brutal. Nvidia had already booked $4.6 billion in H20 sales for the quarter. Almost overnight, $2.5 billion of expected revenue vanished, and the company was forced to write down $4.5 billion in inventory and purchase obligations.
Nvidia’s gross margin dropped from a projected 71.3% to a reported 61.0% as a result.
Even worse, the company expects an $8 billion revenue impact in Q2.
CEO Jensen Huang was unusually direct:
“The H20 export ban ended our Hopper data center business in China.”
He called China a $50 billion opportunity that is now “effectively closed to U.S. industry.”
3. The Strategic Implication: AI Infrastructure Is No Longer Global
Most coverage framed this as a trade-off between China and the rest of the world.
That’s too simplistic.
What we’re witnessing is the early fracture of the global AI supply chain.
The U.S. and China are no longer just economic competitors. They are building two distinct AI ecosystems with separate chips, software stacks, and regulatory environments.
In that world, Nvidia’s leadership comes at a cost.
It can dominate the U.S. and allied markets. But it will do so while ceding the Chinese market to homegrown players like Huawei and Biren, who are already racing to fill the gap.
This isn’t just Nvidia’s problem. It’s a structural risk for any Western company that builds foundational AI infrastructure but depends on cross-border sales to sustain scale.
4. Why Investors Are Still Bullish
Despite these risks, the market cheered Nvidia’s performance.
The company’s stock rose 6% in extended trading. Analysts reiterated buy ratings and in some cases raised price targets. Wall Street seems to agree that whatever Nvidia loses in China, it can more than make up for in the U.S., Europe, and other OECD markets.
And to some extent, they’re right.
Hyperscaler CapEx is accelerating. AI workloads are compounding. Demand for high-performance compute is still outpacing supply in most regions.
But there’s a longer-term question lurking beneath the euphoria:
If the global AI market becomes increasingly segmented by geopolitics, how will companies that rely on platform-scale economics continue to grow?
Will the U.S. alone be big enough to justify the pace of Nvidia’s innovation?
Or will we reach the limits of regional scale in AI?
5. What This Means for AI Infrastructure Builders
If you’re an operator, investor, or policymaker in the AI or data center space, here’s what matters most:
Expect rising costs of complexity. Regional customization of chips, licenses, and compliance will reduce supply chain efficiencies.
Open source may become a wedge. Countries locked out of U.S. silicon will accelerate homegrown and open source hardware to hedge dependence.
Geopolitical resilience will matter more than speed. The ability to navigate regulatory risk may become as valuable as having the best product.
AI infrastructure strategy is now national strategy. Countries are treating compute like energy or telecom—strategic, sovereign, and protected.
This is the new playbook. Nvidia is simply the first to hit its limits at scale.
6. The Bigger Picture
AI infrastructure is no longer a pure business story.
It’s a geopolitical one.
Nvidia’s $44.1 billion quarter is a landmark moment. It validates that AI infrastructure is the backbone of the modern economy.
But it also exposes the vulnerability of being too concentrated in one global model.
As AI becomes foundational (like electricity or the internet) who controls access, distribution, and design will matter more than who builds the best chip.
And the line between commercial success and national interest will blur even further.
One More Thing
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