Nvidia’s shares dipped in after-hours trading on Wednesday as uncertainty surrounding its business in China overshadowed otherwise strong quarterly results. The chipmaker, a bellwether of the artificial intelligence sector, saw its stock fall 3.2%, erasing around $110 billion from its $4.4 trillion market value.
The decline came as Chief Executive Jensen Huang confirmed that Nvidia had excluded potential China sales from its third-quarter forecast. Although the company has reportedly struck a deal with U.S. President Donald Trump to resume chip sales to China by paying commissions to the U.S. government, formal rules have yet to be set. Meanwhile, questions linger over whether Beijing could discourage purchases of Nvidia’s products.
“Nvidia’s biggest bottleneck isn’t silicon, it’s diplomacy,” said Michael Ashley Schulman, chief investment officer at Running Point Capital.
For the third quarter, Nvidia forecast revenue of $54 billion, plus or minus 2%, slightly above analysts’ expectations of $53.14 billion. However, the muted guidance disappointed investors accustomed to the company’s explosive growth. The firm’s fiscal second-quarter revenue rose to $46.74 billion, narrowly beating estimates, though its crucial data centre division fell short of some projections.
A key drag was the uncertainty surrounding Nvidia’s H20 chips, designed for China. While the company recently received licenses to sell them, it has not factored any shipments into its forecast. Nvidia suggested that easing geopolitical tensions could unlock an additional $2 billion to $5 billion in sales from the H20 line in the coming quarter.
Despite these headwinds, demand for Nvidia’s advanced processors remains robust as tech giants race to expand their artificial intelligence capabilities. Meta Platforms, Microsoft, and other major cloud providers have been investing heavily in Nvidia chips, with about half of the company’s $41 billion in data centre revenue last quarter coming from hyperscale customers.
Chief Financial Officer Colette Kress said Nvidia’s “sovereign AI” initiative — selling AI chips and software to governments — is on track to generate $20 billion this year. She projected that cloud and enterprise clients could pour as much as $600 billion into AI infrastructure in 2024, with spending potentially reaching $4 trillion by the end of the decade.
Nvidia also authorised an additional $60 billion in share buybacks, underscoring confidence in long-term growth. Still, analysts warned of near-term risks. “The data centre results, while massive, showed hints that hyperscaler spending could tighten at the margins,” said Jacob Bourne, an analyst at eMarketer.
Shares of rival Advanced Micro Devices also slipped 1.4% following Nvidia’s update.
While Nvidia remains at the centre of the global AI boom, its near-term trajectory now hinges on how Washington and Beijing navigate their increasingly fraught technological rivalry.
