Their customers who would have bought Nvidia chips are instead giving money to Huawei even though they prefer Nvidia. With more money, they can deliver better tech faster. It is costing these customers more, but in return, they get domestic capability with better supply chain security, and a possibility that it can eventually become cheaper than imported chips. Meanwhile, Nvidia gets less money from those lost customers.

I was looking at it under the assumption that the goal of the sanctions is to keep China away from beeing able to compete in AI not how much they have to pay for it.

Also the money the spend on top is mostly domestic. They can build some more powerplants to run less efficient chips. They can pay their workers and their developers to build it.

Sanction motivates … import restriction discourages and may not work in reality …