World number two Nadal crashed out in the second round of the ATP 1000 event on Wednesday, going down 3-6 7-6 (7-4) 6-1 to Tommy Paul.
Nadal, who was contesting his first match since his Laver Cup doubles exhibition with the now-retired Roger Federer, took the opening set and appeared on his way to a comfortable victory when he went up a break in the second.
But Paul broke straight back, going on to win the tie-break before storming home in the decider as Nadal seemed to struggle physically the longer the match dragged on.
Speaking to the media after the loss, Nadal gave credit to his opponent and said he did not deserve to win after blowing his chance.
"It's okay – all the credit to Tommy," he said. "Things happen sometimes.
"I think he played aggressively, a lot of great shots. I had my match in that second set, with a set and break [lead].
"I played a terrible game there. I didn't deserve the victory playing that bad in that key moment, no.
"Until that moment, it was okay, a good match for me. Knowing that this is my first match in a while – and this surface especially, you cannot make mistakes with your serve.
"We are always ready to find excuses, but in the end, it's always the same. You play well, you win; you don't, you lose.
"For moments, putting everything in a pack, I was playing quite well. Then at the right moment, I didn't make the right things. So that's it – he played well, he's having a great year."
Turning his attention to the season finale in Italy, Nadal said he will be there if everything goes to plan.
"Yes, I hope, if nothing happens, I hope to be there," he said. "I'm excited about playing, even if it hasn't been the perfect couple of months for me, of course.
"But yeah, nothing to lose. After a good year, going there, just trying my best. It's true that for the last five months I didn't spend enough days on the Tour.
"I don't even say competing on a tennis court – I say on the Tour. Practicing with the guys, that's what I need."
His lack of a strong build-up to the tournament has 22-time grand slam champion Nadal admittedly not liking his chances, saying it would be "difficult to imagine" this being the year he is able to win his first ATP Finals title.
"I mean, for me it's difficult to imagine now arriving in good enough shape to win a tournament like this one that I didn't win during my whole tennis career," he said.
"To play against the best players of the world, from the first day you need to be there and the rhythm, conditions, that will not happen.
"So the only thing I can do is try to be there earlier, have some good practice with the guys and then give my best on the court – and hopefully the level of tennis will be there, and the body too.
"I can't predict much, and I honestly don't think much about what I have to do or what I don't have to do to be really there.
"I just think about 'be better' – I need to improve a couple of things, and then I need to play sets against the best players, to feel myself again, competitive against everyone.
"That's it – I'm gonna try to make that happen – and if not, you know what, there's going to be next year, and I'm going to try to have the best season possible to start strong."