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After an astonishing three-year return of 1,000%, Nvidia (NASDAQ:NVDA) stock appears to be at a bit of a crossroads.
In particular, investors have started to worry about the mammoth costs associated with the AI infrastructure buildout, as well as rising competition from some of Nvidia’s customers, especially Google.
Then there are concerns about the circularity of some financial deals announced by Nvidia, stoking fears of a dangerous AI bubble. On top of this, investors are getting skittish about high overall market valuations.
Yet Nvidia shareholders got some positive news yesterday (8 December) from President Trump. In a Truth Social post, he wrote: “I have informed President Xi, of China, that the United States will allow Nvidia to ship its H200 products to approved customers in China…President Xi responded positively!“
As in the US, there’s also an AI arms race going on in China. So this lifting of export restrictions to China could result in billions in extra quarterly sales for Nvidia.
As I write though, the Nvidia share price is up just 1% in today’s pre-market. Why is it not surging higher?
The H200
As a reminder, the H200 is a special Nvidia AI chip for China. It’s not as powerful as the firm’s current Blackwell chip, but it’s no slouch. In fact, it’s reportedly almost six times more powerful than the previous dumbed-down H20 China chip.
In theory then, demand for this should be high from Chinese tech firms. However, there are a few caveats.
One is that China imposed its own restrictions on Nvidia’s modified chips earlier this year, with Chinese tech firms reportedly told to cancel orders. This was to accelerate the development of China’s domestic AI industry.
So, has anything really changed there? Will orders actually flood in from China? This can’t be guaranteed, in my opinion, as tech giants in China are unlikely to risk the wrath of regulators by suddenly loading up on US technology.
Another thing worth mentioning is that the US government will collect a 25% fee on sales. That’s actually higher than the 15% levy originally proposed in August! So Nvidia will presumably have to take a margin hit on these H200 chips or raise prices in China.
Finally, Trump wrote that the H200 will only be shipped to “approved customers in China, and other Countries, under conditions that allow for continued strong National Security“.
This tells us there will still be restrictions, certainly for military applications. But also probably for specific Chinese firms like Huawei Technologies (the most successful domestic challenger to Nvidia).
Colossal revenue growth
So, while this news is positive for Nvidia shareholders, and will surely lead to some China sales, it’s unclear whether it will move the needle financially.
After all, the company is already expected to post a colossal $316bn in revenue for its fiscal 2027 year (ending January 2027). That would represent enormous year-on-year growth of 48%.
For a company that’s already the world’s largest by market cap, that’s unheard of. And yet the stock trades at just 25 times next year’s forecast earnings.
At this valuation, I think the stock is worth considering as part of a diversified portfolio.
