Nvidia just dropped its Q2 earnings, and while they crushed revenue, the stock took a surprising dip! What’s behind the hesitation? All eyes are on China sales and the future of AI chips. Are we seeing a temporary blip or a bigger challenge for the tech giant’s dominance?
Nvidia, the undisputed leader in artificial intelligence (AI) chips, recently unveiled its fiscal second-quarter earnings report, delivering impressive revenue figures that surpassed analyst expectations. Despite this financial triumph, the company’s stock experienced a noticeable dip in after-hours trading, primarily fueled by lingering uncertainties surrounding its critical sales in the Chinese market.
The chipmaking behemoth reported robust sales of $46.74 billion and an Earnings Per Share (EPS) of $1.05 for the second quarter, comfortably beating Wall Street forecasts. However, the optimism was tempered by a more conservative third-quarter sales outlook that conspicuously excluded any H20 chip sales projections for China, a pivotal market for Nvidia’s growth trajectory and global market presence.
Central to this market trepidation is the ongoing geopolitical climate affecting chip sales to China. Nvidia’s chief financial officer, Colette Kress, highlighted that the company is awaiting formal regulatory guidance regarding a proposed 15% remittance the White House seeks from Nvidia and AMD on chips sold to China. This unresolved issue has put a significant asterisk on future revenue streams from the region.
Analyst reactions to Nvidia’s earnings were mixed but generally acknowledged the underlying strength of AI demand. While some, like Dan Ives of Wedbush, lauded the “Godfather of AI Jensen and Nvidia” for another robust quarter and strong guidance, others like Thomas Monteiro from Investing.com expressed caution. Monteiro argued that without the “much-needed push from H20 sales in China,” Nvidia might struggle to sustain the hyper-growth priced into its current valuation, despite impressive data center performance.
CEO Jensen Huang reiterated the overwhelming demand for AI chips, stating that “everything’s sold out,” including Nvidia’s high-performance H100s and H200 chips. He emphasized the company’s commitment to improving revenue generation and AI capability through new architectures, hinting at the upcoming Rubin chip expected in 2026, while stressing the importance of American companies maintaining access to the lucrative Chinese market.
The complex geopolitical landscape has seen various developments, including a reported deal with the Trump administration to ease restrictions on H20 chip sales to China. However, this was complicated by reports of the Chinese government instructing local tech companies to cease H20 GPU purchases due to security concerns, further clouding Nvidia’s sales prospects in the region and leading to production halts from some suppliers.
Despite the China headwinds, the broader tech ecosystem shows strong tailwinds for Nvidia. Major tech giants like Amazon, Microsoft, Google, and Meta have all announced increased capital expenditure plans, signaling a surging demand for the advanced computing infrastructure that Nvidia’s AI chips power. Analysts remain optimistic about Nvidia’s market leadership in AI accelerators for years to come, with strong demand noted across its product lines.
Firms like Baird, JPMorgan, Stifel, and Evercore have largely maintained “Outperform” or “Buy” ratings, raising price targets and emphasizing the strong near-term AI fundamentals driven by hyperscale capex spending. The consensus points to Nvidia’s continued dominance in the AI GPU competitive landscape, projecting significant acceleration in shipments and a robust long-term outlook, even as it navigates complex international trade relations.
