Nvidia recently reported impressive growth, even amid concerns about its business in China. The company earned $46.7 billion in revenue for the quarter ending July 28, a 56% increase from last year. This was slightly above analyst expectations of $46.5 billion, according to Visible Alpha.
Looking ahead, Nvidia is predicting sales of about $54 billion for the current quarter, while the market had anticipated around $53.8 billion. This growth is largely driven by Nvidia’s crucial role in creating chips for AI applications, like ChatGPT.
However, Nvidia faces challenges due to trade tensions between the U.S. and China. Recently, the U.S. implemented export controls on certain chips, significantly impacting Nvidia’s business. Although the company reached an agreement to resume sales of its H20 chips to China, it did not include any revenue from these sales in its latest forecasts. Many analysts were surprised by this decision, expecting it to have a more optimistic outlook.
Gene Munster from Deepwater Asset Management noted, “The $54 billion guidance doesn’t include the H20, which shocked many.” Analysts had predicted up to $2 billion more in revenue from Chinese sales after the export restrictions were lifted.
The geopolitical landscape surrounding Nvidia is complex. Earlier this year, new U.S. export controls halted its sales in China. Recently, Nvidia agreed to pay a 15% cut on sales to get a license to resume. But China’s response has been cautious, limiting its companies’ ability to use these chips, leaving investors uncertain about Nvidia’s future sales.
Nvidia’s CFO, Colette Kress, stated that the company is still waiting for official regulations from the U.S. that would clarify its deal. If the situation improves, Nvidia could potentially sell between $2 billion and $5 billion of the H20 chips in the next quarter.
Despite these hurdles, Nvidia found success outside China, selling $650 million worth of H20 chips to customers elsewhere. The company’s data center revenue, related to its AI chip business, reached $41.1 billion but fell slightly short of expectations. Meanwhile, its gaming segment earnings exceeded predictions, helping to offset the shortfall.
Nvidia’s stock has seen a dramatic rise, climbing about 35% this year. But it remains sensitive to negative news, such as recent reports questioning the practicality of AI. For instance, during a recent tech sell-off, concerns about overhyped AI applications caused a dip in its shares.
Moreover, net income rose by 59% to $26.4 billion, surpassing forecasts. Earnings per share stood at $1.08, and its adjusted gross margin was 72.7%, just above estimates.
Looking ahead, Nvidia is ramping up production of its new Blackwell Ultra platform, with high demand reported by CEO Jensen Huang. This rollout requires advanced infrastructure to integrate its innovative chips effectively, although the process has faced some technical challenges.
In summary, while Nvidia continues to thrive, particularly in the AI market, the ongoing geopolitical tensions with China present significant uncertainties that could affect its financial outlook in the coming months.
For more insights into Nvidia’s financial performance and the implications of global trade policies, check this report from the Wall Street Journal.
