Global Head of Investment Strategy
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.
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.
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.
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.
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.
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.
Investors must watch the following themes closely:
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.
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