Finance
Nvidia still growing, but China uncertainty clouds outlook
Published by Global Banking & Finance Review®
Posted on August 28, 2025
4 min readLast updated: January 22, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on August 28, 2025
4 min readLast updated: January 22, 2026
Nvidia's growth persists despite uncertainty in the China market, impacting its financial outlook and AI chip sales.
By Stephen Nellis, Max A. Cherney and Arsheeya Bajwa
(Reuters) -Nvidia shares dipped on Wednesday as the fate of its China business hung in the balance, caught up in the trade war between Washington and Beijing.
CEO Jensen Huang expects permission to restart selling Nvidia's chips to China after striking a deal with U.S. President Donald Trump to pay commissions to the U.S. government. But with no formal U.S. rules in place and questions about whether Chinese regulators will discourage purchases of Nvidia chips, the AI market bellwether excluded potential China sales from the forecast for the current quarter.
That left only a lukewarm outlook that, while still huge in absolute dollar terms and slightly above analyst estimates, disappointed investors accustomed to blowout results and sent shares down 3.2% in after-hours trading. The stock dip clipped about $110 billion from Nvidia’s $4.4 trillion market capitalization.
"Nvidia’s biggest bottleneck isn’t silicon, it’s diplomacy," said Michael Ashley Schulman, chief investment officer at Running Point Capital. He added that Nvidia’s growth curve was "still impressive, but not as exponential."
The chipmaker expects revenue of $54 billion, plus or minus 2%, in the third quarter, compared with analysts' average estimate of $53.14 billion, according to data compiled by LSEG. But its fiscal second-quarter results came up short of some analyst expectations in its important data center segment, with some analysts suggesting cloud computing providers may be more cautious about spending.
Nvidia also said it has not assumed any shipments of its H20 chips to China in its outlook, despite having earlier this month received some licenses to sell them. If geopolitical issues subside and it gets more orders, Nvidia said it could add $2 billion to $5 billion in H20 revenue in the third quarter.
While Nvidia's forecast came in a bit softer than expectations, any sales to China next quarter would be added to the outlook, said Ben Bajarin, CEO of technology consulting firm Creative Strategies. "That is a big question mark to watch."
Still, demand has surged for Nvidia's advanced chips that can speedily process the large amounts of data used by generative AI applications as businesses race each other to dominate the new technology.
Chief Financial Officer Colette Kress said the company's "sovereign AI" efforts - a push to sell AI chips and software to governments around the world - are on track to generate $20 billion in revenue this year. Kress also said AI efforts are on track to spur $600 billion in spending by cloud and enterprise customers this year alone and could generate $3 trillion to $4 trillion in infrastructure spending by the end of the decade.
Big Tech companies including Meta Platforms and Microsoft have been spending liberally to support their AI ambitions, and Nvidia is the biggest beneficiary, with a significant chunk of this spending funneled toward its chips.
The company said that about half of its $41 billion in data center revenue came from large cloud service providers during the latest quarter.
That was slightly below estimates of $41.42 billion, according to data from Visible Alpha. Nvidia also forecast adjusted gross margins of 73.5% for the current quarter, only slightly above analyst estimates of 73.3%, according to LSEG data.
"The data center results, while massive, showed hints that hyperscaler spending could tighten at the margins if near-term returns from AI applications remain difficult to quantify," said eMarketer analyst Jacob Bourne.
Shares of Advanced Micro Devices, which is developing AI servers to rival Nvidia's, were also down 1.4% after Nvidia's results.
Enthusiasm for AI stocks, centered around Nvidia as Wall Street engaged in picks-and-shovels trading, has been the dominating force behind the rally of the S&P 500 Index over the last two years.
"This is the smallest reaction to an earnings report in Nvidia’s AI incarnation," said Jake Behan, head of capital markets at Direxion in New York. "While it may not have been a blowout, it’s not a miss."
Nvidia had in May expected the curbs to shave off $8 billion in sales from the July quarter. The company reported revenue of $46.74 billion for the second quarter, beating estimates of $46.06 billion.
However, there does appear to be demand for Nvidia's H20 outside of China. Kress said during the analyst call that a single customer outside of China bought $650 million worth of the chips during the second quarter.
Nvidia also said it had authorized an additional $60 billion in share repurchases.
(Reporting by Arsheeya Bajwa in Bengaluru; Max A. Cherney and Stephen Nellis in San Francisco and Suzanne McGee Providence, Rhode Island; Editing by Maju Samuel, Sayantani Ghosh, Kenneth Li and Matthew Lewis)
Nvidia expects revenue of $54 billion, plus or minus 2%, in the third quarter, slightly above analyst estimates of $53.14 billion.
Nvidia's shares dipped due to uncertainty surrounding its China business, which is impacted by the ongoing trade war between Washington and Beijing.
Nvidia has not assumed any shipments of its H20 chips to China in its outlook, despite receiving some licenses, indicating ongoing geopolitical challenges.
Nvidia's advanced chips are in high demand for generative AI applications, with the company expecting its 'sovereign AI' efforts to generate $20 billion in revenue.
Nvidia reported revenue of $46.74 billion for the second quarter, beating estimates of $46.06 billion.
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