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Nvidia’s blockbuster earnings: weathering geopolitical storms and pioneering the AI revolution
Jacob Falkencrone
Global Head of Investment Strategy
Key points:
- Nvidia delivered strong quarterly results, driven by robust AI chip demand, successful Blackwell rollout, and expanding customer diversification, despite a significant USD 8 billion revenue hit from US-China trade restrictions.
- China's geopolitical risks remain critical, as export controls accelerate China's domestic AI capabilities, threatening Nvidia’s long-term market position and global AI leadership.
- Investor focus areas going forward include Nvidia’s margin recovery trajectory, further expansion beyond hyperscalers into diversified industries, and strategic responses to intensifying competitive pressure from Chinese AI innovation.
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Imagine sailing a state-of-the-art ship directly into a fierce storm, with towering waves and relentless wind. Yet not only does your vessel remain intact—it accelerates ahead.
Nvidia’s recent quarterly earnings echoed exactly this scenario, as the tech giant powered through intense geopolitical headwinds, particularly stemming from escalating US-China tensions and export restrictions. However, for investors, it's the resilience beneath these impressive figures that truly matters.
Extraordinary growth amid challenging times
Nvidia reported remarkable quarterly revenues of USD 44.1 billion, up a stunning 69% year-over-year, comfortably surpassing analyst forecasts. The data-centre segment, central to Nvidia’s success, soared to USD 39.1 billion, a 73% increase. Nvidia’s data-centre revenue now dwarfs that of all its closest rivals combined, underscoring its dominance as the preferred supplier of AI infrastructure to tech giants like Amazon, Microsoft, Alphabet, and Meta. Nvidia reported strong profitability this quarter, with a gross margin of 71.3% (excluding the China-related inventory charges), underscoring the company's robust operational performance. CEO Jensen Huang emphasized Nvidia's role at the heart of the ongoing AI revolution, highlighting how fundamental artificial intelligence has become, comparable to electricity or the internet itself. Nvidia guided for next-quarter revenue of USD 45 billion, broadly in line with analyst expectations, despite an anticipated USD 8 billion hit from China restrictions.
Navigating strong China headwinds—the USD 8 billion storm
However, Nvidia’s journey wasn't entirely smooth. Recent US government export restrictions on Nvidia’s advanced H20 chips, tailored specifically for China, led to a substantial USD 4.5 billion inventory write-down. This impact will deepen next quarter, with Nvidia projecting a further USD 8 billion revenue shortfall due to the inability to sell these chips into China.
CEO Huang challenged the strategic thinking behind US export controls, explaining that restricting Nvidia’s products won't slow China’s AI development. Instead, these limitations have accelerated China’s domestic innovation, inadvertently strengthening competitors such as Huawei. For Nvidia investors, the crucial issue now is how the company will strategically adapt to these restrictions—possibly by creating alternative chips compliant with the rules—to maintain its competitiveness in China.
Blackwell: Nvidia’s strategic AI shift
Despite the China setback, Nvidia’s strategic pivot to its groundbreaking Blackwell chips advanced smoothly after overcoming early production hurdles. Large-scale deployments at customers like Microsoft signify growing confidence in Blackwell’s capabilities. Nvidia’s management has reiterated that as Blackwell scales, profit margins are set to recover toward historical highs in the mid-70% range.
Blackwell represents more than just another product line—it marks Nvidia’s deeper integration into global AI infrastructure, underpinning growth across diverse sectors including cloud computing, robotics, healthcare, and professional services.
Broadening beyond hyperscalers: a crucial pivot
Another positive development is Nvidia’s expanding reach beyond traditional hyperscalers. CFO Colette Kress highlighted increasing demand across various industries, including automotive, robotics, healthcare, and consulting. Investors have long sought this diversification, aiming to reduce dependency on a small group of large cloud providers. This growing customer base suggests Nvidia’s long-term market opportunities continue to expand.
Competitive threats from China's domestic AI
Adding urgency to Nvidia’s strategic responses is China’s rapid advancement in AI, exemplified by companies like DeepSeek, whose chatbot rivals Western tools such as ChatGPT. Huang clarified that these emerging "reasoning models" actually boost, rather than diminish, demand for advanced computational power. Nvidia is therefore well positioned—but investors must remain vigilant to how this evolving competitive landscape impacts future earnings.
Key considerations for investors
Investors must watch the following themes closely:
- Broadening revenue streams: The move toward diverse end-markets—from automotive to healthcare—signals greater long-term stability. Watch for progress here as an essential future growth driver.
- Navigating China strategically: With USD 8 billion in immediate lost revenue, the strategic adjustments Nvidia makes for China—possibly via lower-powered chips or new compliance strategies—will significantly impact future earnings and global market positioning.
- Blackwell profitability and execution: Monitor closely the pace of Blackwell adoption by hyperscalers and other customers. The promised return of margins to the mid-70% range depends heavily on successful execution.
- China's competitive AI landscape: Nvidia faces intensified competition as China rapidly develops its own AI industry. DeepSeek and other reasoning models represent both risks and opportunities, as their adoption creates even greater demand for high-compute solutions.
Nvidia’s crossroads moment
Nvidia currently occupies a uniquely complex position—right at the intersection of geopolitical tensions and transformative AI innovation. The risks it faces from China are significant, but so too is its strategic opportunity globally, evidenced by substantial new partnerships in places like Saudi Arabia and across the Middle East.
The immediate challenge for Nvidia—and thus its investors—is clear: the company must successfully navigate these geopolitical storms while delivering on its ambitious technological roadmap. Any missteps or unforeseen disruptions could swiftly change investor sentiment.
Yet, Huang’s powerful vision remains Nvidia’s guiding star, neatly summarizing the potential investors are betting on:
“Countries worldwide recognize AI as essential infrastructure—like electricity, like the internet. Nvidia stands at the very centre of this profound transformation.”
Navigating stormy waters has never been easy, but Nvidia’s impressive execution so far suggests it’s uniquely equipped not just to survive—but thrive. For investors, watching Nvidia isn't merely about tracking a company’s financial results—it’s about keeping a finger on the pulse of global technology itself.