The graphics processor giant Nvidia released its quarterly earnings broadly in line with Wall Street’s expectations. Yet, market reaction was tinged with disappointment. The reason lies in revenue forecasts deemed too cautious, and above all, in lingering uncertainties surrounding the Chinese market, which has become a minefield amid geopolitical tensions.
Solid Results but No Spark
For its second fiscal quarter, Nvidia once again confirmed its status as the undisputed leader in semiconductors. The company led by Jensen Huang continues to benefit from massive demand for its GPUs, now essential in the global race for artificial intelligence. These chips power models from OpenAI, Google, and Meta, making Nvidia the indispensable supplier of today’s digital economy.
Still, while the numbers reassured on the surface, they failed to ignite Wall Street. The stock fell 3.1% in after-hours trading. As Stephen Innes of Spi AM put it, this wasn’t a crash but more of a “speed bump on an otherwise clear road”: a temporary slowdown rather than a real breakdown.
Revenue Forecasts Seen as Too Modest
The cloud over Nvidia’s results comes from its guidance for the current quarter. The company is targeting revenues around $54 billion, representing 54% year-over-year growth. Impressive at first glance, but slower compared to the previous two quarters.
This guidance aligns with analyst consensus (about $53.5 billion). Yet it disappointed the most optimistic investors, who were hoping for figures closer to $55 or even $60 billion. In a context where Nvidia’s stock has already gained $2 trillion in market capitalization since April, “hitting the bar isn’t enough,” Stephen Innes observed. In other words, at such lofty valuations, merely meeting expectations is considered mediocre.
The Weight of China and U.S. Restrictions
Nvidia’s cautious stance is also explained by its exposure to political decisions in Washington and reactions from Beijing. To circumvent Biden-era export restrictions, Nvidia had developed H20 chips specifically for the Chinese market. But the Trump administration tightened these restrictions earlier this year, effectively banning their export. As a result, Nvidia recorded no revenue from H20 chips in the second quarter, with the shortfall estimated at around $8 billion.
Recently, hopes were raised by reports of an agreement between Nvidia, AMD, and Washington, under which the companies would resume exports to China in exchange for handing over 15% of related revenues to the U.S. government. However, without a clear legal framework, Nvidia has chosen not to include any H20-related revenue in its forecasts. CFO Colette Kress admitted, however, that if restrictions were eased, the company could generate an additional $2 to $5 billion.
Beijing Pressures Its Tech Giants
Even if U.S. restrictions were lifted, there is no guarantee that Chinese giants such as ByteDance or Tencent would continue buying Nvidia chips in large volumes. Beijing is increasingly urging its key firms to cut reliance on American technology in the name of digital sovereignty. According to the South China Morning Post, several firms were even summoned by authorities to slow their purchases of Nvidia’s H20 chips.
Bloomberg confirmed that the Chinese government is pushing for a gradual shift away from U.S. solutions for sensitive AI systems. Such a strategy could, in the medium term, weaken Nvidia’s dominance in China, a vital market that is nonetheless becoming more locked down by geopolitical rivalry.
Nvidia as the Stock Market’s AI Barometer
Beyond its earnings, Nvidia remains the market’s barometer for AI hype. Each quarterly release is scrutinized as a gauge of tech giants’ appetite to keep investing in advanced systems. The relative slowdown in Nvidia’s growth could therefore fuel concerns about the sustainability of this tech boom.
That said, Nvidia remains the undisputed leader in its field, boasting huge margins and a technological edge that still allows it to set the pace. The real question is not whether the company will continue to grow, but whether it can sustain this breakneck speed in a more uncertain political and economic climate.
