China Revenue Pressures Don't Dismiss Nvidia's Bullish Outlook

Nvidia's China revenue constraints do not negate the bull case, as the stock has traded laterally since the last analysis. Political friction is likely to impact China revenues, but this does not necessarily mean the bull case is invalid.

In the high-stakes arena of artificial intelligence, Nvidia (NVDA) finds itself at the epicenter of geopolitical and technological crosswinds. Despite facing significant revenue constraints from U.S. export controls on China, the company has demonstrated resilience and strategic adaptability. This article examines Nvidia's position in China and evaluates the impact of geopolitical tensions on its financial performance and long-term investment prospects.

Nvidia's financial performance underscores its pivotal role in the AI revolution. In fiscal year 2025, the company reported revenue of $130.5 billion, a 114.2% year-over-year increase, driven by insatiable demand for its data center GPUs [1]. However, the Chinese market—a once-vibrant growth engine—has become a battleground. U.S. export restrictions on advanced chips like the H100 and H20 have cost Nvidia approximately $10.5 billion in revenue in early 2026 [1]. To mitigate this, the company has developed China-compliant variants such as the A800 and H800, and more recently, the B30A, a Blackwell-based chip designed to outperform the H20 while adhering to export rules [4].

Yet, the challenges extend beyond product adaptation. The U.S. government’s 15% revenue-share agreement on China exports is projected to reduce Nvidia’s gross margins by 5% to 15% [1]. Meanwhile, Chinese regulators have actively discouraged reliance on foreign chips, citing security risks and promoting domestic alternatives like Huawei and Cambricon. This has led to a 4,300% revenue surge for Cambricon in the first half of 2025 [3], signaling a shift in market dynamics.

Nvidia’s position contrasts sharply with its rivals. AMD, for instance, has leveraged a diversified portfolio—spanning data centers, client processors, and embedded systems—to grow its AI segment by 50% year-over-year in 2023 [5]. Intel, meanwhile, struggles with its IDM 2.0 strategy, lagging in GPU capabilities and facing heightened exposure to China’s volatile market [3].

Nvidia’s resilience lies in its ecosystem dominance. Its CUDA platform, supported by 3.5 million developers, creates a formidable moat [5]. Strategic partnerships with AI giants like Microsoft, OpenAI, and Meta further cement its role in global infrastructure [3]. Additionally, the company’s supply chain agility—secured through long-term agreements with TSMC for CoWoS technology and critical components—ensures production stability amid global semiconductor volatility [3].

Geopolitical and investment frameworks: Navigating the crosswinds
The AI semiconductor supply chain remains perilously concentrated, relying on just three entities: NVIDIA for design, ASML for lithography, and TSMC for manufacturing [6]. This fragility amplifies geopolitical risks, as the U.S. and China vie for AI supremacy. For investors, the key lies in assessing companies’ ability to diversify supply chains and align with regulatory frameworks.

Nvidia’s strategy to expand into Europe and the Middle East—markets with growing AI demand—demonstrates a proactive approach to geopolitical volatility [6]. However, its reliance on TSMC and U.S. export policies introduces instability. In contrast, AMD’s diversified product lines and lower market cap offer potential for higher percentage gains if it captures more AI market share [2]. Intel’s repositioning, though ambitious, remains unproven in the AI era.

Environmental sustainability also emerges as a critical factor. Chip manufacturing’s energy and water intensity demands innovation in cooling and clean energy integration [4]. Nvidia’s investments in advanced packaging and energy-efficient architectures position it favorably, but long-term success will hinge on balancing performance with sustainability.

Conclusion: The Path Forward
Nvidia’s strategic position in China is a microcosm of broader global tensions. While the company has adeptly navigated export controls through product adaptation and market diversification, its future depends on geopolitical outcomes and the pace of China’s self-reliance drive. For investors, the lesson is clear: resilience in politically volatile markets requires not only technological innovation but also geopolitical agility and supply chain diversification.

As Jensen Huang advocates for resumed chip sales to China, the stakes could not be higher. The coming quarters will test whether Nvidia can maintain its 80% AI chip market share while navigating a landscape where technology and politics are inextricably linked.

References:
[1] https://www.ainvest.com/news/nvidia-strategic-position-china-geopolitical-technological-crosswinds-2509/
[2] https://finance.yahoo.com/news/nvidia-rides-ai-wave-56-141812459.html
[3] https://m.economictimes.com/tech/technology/chinese-firms-still-want-nvidia-chips-despite-government-pressure-not-to-buy-sources-say/articleshow/123693263.cms
[4] Understanding U.S. Allies' Current Legal Authority to Implement AI and Semiconductor Export Controls [https://www.csis.org/analysis/understanding-us-allies-current-legal-authority-implement-ai-and-semiconductor-export]
[5] AI Chips in 2020-2030: How Nvidia, AMD, and Google Are ... [https://patentpc.com/blog/ai-chips-in-2020-2030-how-nvidia-amd-and-google-are-dominating-key-stats]
[6] The AI Chips Supply Chain Incredible Fragility [https://medium.com/@gaetanlion/the-ai-chips-supply-chain-incredible-fragility-6d6a7197b3c5]