Nvidia’s Revenue Results Amid China Tensions: Explained
Nvidia reports another blockbuster quarter, with revenue hitting US$46.7bn – a 56% jump from last year – though the chip designer’s shares still tumbled in after-hours trading as investors fretted over China trade tensions.
The company saw its data centre business pull in US$41.1bn during the three months to July. That’s a 56% increase year-on-year, though it came in slightly below what analysts had been expecting.
CEO Jensen Huang says that the four biggest tech companies are now spending US$600bn a year on AI infrastructure – double what the company was shelling out before.
“Over time, you would think that AI would accelerate GDP growth. Our contribution to that is a large part of the AI infrastructure,” Jensen says in a call following the report’s release.
Much of that spending is coming from the likes of Meta, which runs Instagram and Facebook and OpenAI.
Both companies need Nvidia’s high-end chips to power AI systems and train new models.
How Meta and OpenAI fuel Nvidia’s chip sales
The revenue beat is happening despite Nvidia having to wrestle with the fallout from US President Donald Trump’s return to the White House.
The administration has been tightening the screws on chip exports to China, worried that advanced semiconductors could end up helping Beijing’s military.
Eileen Burbridge, an Investor and Founding Partner of Passion Capital, told the BBC that the share price wobble reflects the data centre division: “Not posting results as strong as it was hoping”.
Still, she admits the growth has been “unbelievable”, though adds there’s been “so much capital that’s gone in that I don’t think it’s unfair to say there’s been maybe too much exuberance or a bit of a bubble”.
Now, Nvidia is forecasting US$54bn in revenue for the current quarter, which would beat Wall Street expectations.
The company already hit a US$4trn market value in July, making it the world’s most valuable firm.
But the China situation remains messy. Back in July, Nvidia said it would start selling its high-end AI chips to Chinese customers again after Jensen managed to convince President Trump’s team to lift restrictions on the company’s H20 processors.
“The AI race is now on.”
These chips were specifically designed for the Chinese market to get around export controls.
Inside H20 chip licences under US government review
Company executives say that Washington started reviewing licences for H20 sales to Chinese customers in late July.
Some China-based firms have received these licences in recent weeks, but Nvidia hasn’t actually shipped any chips yet.
The US government wants a 15% cut of any revenue from licensed H20 sales.
Nvidia hasn’t baked any H20 sales into its current quarter guidance and is still trying to get approval to sell its newer Blackwell chips to China – the world’s biggest semiconductor market.
The trade tensions show how tricky it’s become for chip companies trying to serve both American and Chinese customers.
Export controls are meant to stop advanced processors from helping China’s military, but they’re creating headaches for companies that depend on global sales.
The regulatory uncertainty hasn’t dampened enthusiasm from Nvidia’s biggest customers yet.
Tech giants are pouring money into AI data centres and cloud infrastructure, driving demand for the company’s most powerful chips.
Growing investment bubble concerns
Cloud computing companies like Amazon Web Services (AWS) and Microsoft Azure need ever-more powerful chips to handle AI workloads.
Social media platforms are using AI for content recommendation and moderation. Even traditional software firms are scrambling to add AI features to their products.
Jensen’s pitch to investors during Wednesday’s call hammered home how central Nvidia has become to the broader AI revolution.
The company’s chips don’t just power individual AI applications – they’re becoming the foundation for entire digital economies built around AI.
But questions remain about whether the current pace of investment can continue.
Some analysts worry that companies are buying more AI infrastructure than they can actually use profitably.
For now, though, the money keeps flowing. “The AI race is now on,” Jensen says.
