Nvidia shares dip after robust quarterly results amid China uncertainty

Nvidia, the world’s most valuable company, delivered second quarter results that outpaced expectations, propelled by unrelenting demand for its advanced artificial intelligence chips. Revenue climbed 56 per cent over the same period last year to $46.74 billion, comfortably surpassing analyst forecasts of $46.05 billion. The company’s net income soared to $26.4 billion, marking a 59 per cent year on year rise and beating consensus estimates of $24.7 billion.

Despite this exceptional performance, Nvidia’s shares slipped 3 per cent in after hours trading. The decline followed a slight miss on data centre revenue, which reached $41.1 billion but came in below market expectations. Despite this short-term reaction, Nvidia’s share price remains up 35 per cent since the beginning of the year, leaving it with a towering market capitalisation of $4.4 trillion. For comparison, Microsoft stands at $3.8 trillion, while Apple lags at $3.4 trillion.

Nvidia has dominated the chip sector, leaving competitors such as Broadcom and AMD in its wake. Broadcom’s market value sits at $1.4 trillion, with AMD at $265 billion and Intel trailing considerably at $107 billion. Investors have flocked to NVIDIA and other AI-centric firms as significant tech giants—Alphabet, Microsoft, and Amazon—announce ambitious infrastructure investments to support AI development. These moves follow a period of volatility triggered by a sell-off in the sector, fuelled by mounting trade frictions and rising competition from China’s DeepSeek and ongoing trade hostilities.

Tensions between Washington and Beijing have cast a shadow over Nvidia’s lucrative China business. Sales to China constituted $17 billion last year, representing 13 per cent of company revenues. The chipmaker wrote off $4.5 billion in the first quarter due to inventory issues arising from the US government’s ban, under President Trump, on Nvidia’s H20 chip which was purpose-built for the Chinese market. Although the White House later reversed this restriction, Nvidia was compelled to allocate 15 per cent of its China chip sales revenue to the US government in exchange for export licences.

Despite recent moves by the US administration, Chinese authorities have voiced concerns regarding the security of Nvidia’s products, summoning technology giants like Tencent and ByteDance to discuss their H20 chip purchases. Allegations of potential security risks have clouded the operating environment, even as Nvidia maintains that its chips are free from backdoor vulnerabilities.

The company’s financial chief, Colette Kress, revealed that select customers in China have recently secured licences for the H20 chips, although comprehensive regulations regarding the 15 per cent revenue requirement are yet to be released. The firm expects to ship between $2 billion and $5 billion of H20 chips in the third quarter, should geopolitical tensions abate. Meanwhile, Nvidia is lobbying for approval to export its more advanced Blackwell chip to the Chinese market. The company forecasts third quarter sales of $54 billion, plus or minus 2 per cent, remaining ahead of analyst predictions even without incorporating potential H20 sales.

Jensen Huang, Nvidia’s chief executive, confirmed ongoing discussions with US authorities to enable China to access a more powerful chip than the current H20 model. With a substantial inventory ready and awaiting orders, Nvidia is hoping to secure further licensing and regulatory clarity in the months ahead. The company’s bullish guidance reflects strong confidence in the ongoing growth of global AI and robotics investment, positioning Nvidia at the heart of the technology revolution.