Nvidia on Wednesday reported quarterly earnings that beat market expectations, despite a $4.5 billion impact from U.S. export controls—less than the chipmaker had previously feared.

The Silicon Valley-based company posted a profit of $18.8 billion on revenue of $44.1 billion, prompting shares to rise nearly 4% in after-hours trading.

Nvidia had earlier warned regulators of a potential $5.5 billion hit due to a new U.S. licensing requirement affecting the primary chip it can sell to China. The company said U.S. officials informed it that licenses were now required to export its H20 chips to China, citing national security concerns over their potential use in supercomputers.

The new rule, which applies to Nvidia GPUs with bandwidth similar to the H20, follows previous restrictions on the company’s most advanced GPUs designed for artificial intelligence. Nvidia said it was informed the licensing requirement would remain in place indefinitely.

The $4.5 billion charge recorded this quarter was attributed to excess inventory and purchase obligations tied to H20 chips, which saw reduced demand due to the new export rules. The company also noted it was unable to secure an estimated $2.5 billion in H20-related revenue during the quarter.

Still, Nvidia Chief Executive Jensen Huang emphasized continued strong global demand for its AI technology, highlighting the launch of the new Blackwell NVL72 AI supercomputer.

“Countries around the world are recognizing AI as essential infrastructure — just like electricity and the internet — and NVIDIA stands at the center of this profound transformation,” Huang said.

Nvidia’s data center division generated $39.1 billion in revenue, up 10% year-over-year, though it fell short of some analyst expectations.

“Nvidia beat expectations again but in a market where maintaining this dominance is becoming more challenging,” said Emarketer analyst Jacob Bourne.

“The China export restrictions underscore the immediate pressure from geopolitical headwinds but Nvidia also faces mounting competitive pressure as rivals like AMD gain ground on cost-effectiveness metrics for certain AI workloads,” Bourne added.

Revenue in the company’s gaming chip business reached a record $3.8 billion, a 48% increase year-over-year, surpassing forecasts.

Nvidia’s stock has rebounded from a sharp sell-off earlier this year, partly triggered by the emergence of China’s DeepSeek R1 chatbot, which claims performance comparable to leading U.S. AI systems at a lower cost.

“The broader concern is that trade tensions and potential tariff impacts on data center expansion could create headwinds for AI chip demand in upcoming quarters,” Bourne said.

“This doesn't signal an end to Nvidia's dominance, but highlights that sustaining it will require navigating an increasingly complex landscape of geopolitical, competitive, and economic challenges.”