• Nvidia shares fell 3.2% after it left China sales out of its forecast amid regulatory doubts.
• A US$54B outlook wasn’t enough to satisfy investors expecting stronger growth.

Nvidia shares slipped on Wednesday as uncertainty grew around its business in China, caught in the middle of the trade fight between Washington and Beijing.

CEO Jensen Huang said he expects approval to restart sales of Nvidia chips in China after striking a deal with US President Donald Trump to pay commissions to the government. But with no formal rules yet, and doubts about whether Chinese regulators might discourage purchases, Nvidia left potential China sales out of its forecast for the current quarter.

That decision led to an outlook that looked steady but less than what investors have come to expect. Nvidia projected revenue of about US$54 billion for the third quarter, just above Wall Street estimates of US$53.14 billion, according to LSEG data. The forecast was enough to beat analyst targets but fell short of the “blowout” growth the market has grown used to, pushing the stock down 3.2 per cent in after-hours trading. That drop cut about US$110 billion from Nvidia’s US$4.4 trillion valuation.

As reported by Reuters, Huang downplayed concerns that the AI spending surge could be cooling, telling investors the opportunity could expand into a multi-trillion-dollar market over the next five years. “A new industrial revolution has started. The AI race is on,” he said, adding that Nvidia sees $3 trillion to $4 trillion in AI infrastructure spending by the end of the decade.

“Nvidia’s biggest bottleneck isn’t silicon, it’s diplomacy,” said Michael Ashley Schulman, chief investment officer at Running Point Capital. He added the company’s growth is “still impressive, but not as exponential.”

Second-quarter revenue reached US$46.74 billion, above the US$46.06 billion analysts expected. But the data centre segment, a key driver of Nvidia’s growth, missed some estimates. Analysts suggested that big cloud providers may be spending more carefully. Nvidia said around half of its US$41 billion in data centre revenue came from major cloud companies, slightly below Visible Alpha’s estimates of US$41.42 billion.

The company’s forecast also assumed no shipments of its H20 chips to China, even though some licenses to sell them have already been granted. Nvidia said that if geopolitical hurdles ease and orders come in, H20 sales to China could add between US$2 billion and US$5 billion in the third quarter.

“That is a big question mark to watch,” said Ben Bajarin, CEO of consulting firm Creative Strategies.

Analysts also pointed out that Nvidia’s share price, which has risen by about one-third this year, may have created lofty expectations that are hard to meet. “The mega caps are the ones propelling a lot of the capex that Nvidia is benefiting from. But obviously Nvidia still is growing, is able to sell,” said Matt Orton of Raymond James Investment Management, who argued the durability of the AI trade remains intact.

Even so, demand for Nvidia’s chips remains strong. Businesses racing to build generative AI systems continue to buy the company’s processors, which are designed to handle huge amounts of data quickly. CFO Colette Kress said Nvidia’s “sovereign AI” push — aimed at selling AI hardware and software to governments, including outside China — is on track to bring in US$20 billion this year. She added that cloud and enterprise customers could spend as much as US$600 billion on AI in 2025 alone, with total infrastructure spending tied to AI reaching US$3 trillion to US$4 trillion by the end of the decade.

Huang said much of this growth will come from hyperscalers like Microsoft and Amazon, which are expected to spend about US$600 billion on data centres this year. He added that for a US$60 billion data centre, Nvidia can capture roughly US$35 billion in revenue.

Big Tech firms including Meta and Microsoft are spending heavily on AI, much of it flowing toward Nvidia chips. For the current quarter, Nvidia forecast adjusted gross margins of 73.5 per cent, a touch above analyst estimates of 73.3 per cent.

“The data centre 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 Jacob Bourne, an analyst at eMarketer.

Shares of rival Advanced Micro Devices, which is developing competing AI servers, also fell 1.4 per cent after Nvidia’s results.

AI enthusiasm, with Nvidia at the centre, has been one of the main drivers of the S&P 500’s rally over the past two years. But the company’s latest report drew a more muted response.

“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.”

Outside China, Nvidia is still seeing strong demand for its H20 chips. Kress said one customer alone bought US$650 million worth during the second quarter.

Huang also said the company’s high-end Blackwell chips are already largely booked through 2026, while its older Hopper processors remain in demand. “The buzz is: everything sold out,” Huang told analysts, describing the pace of orders.

The company also said its board had approved an additional US$60 billion in share buybacks.

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