GPU Stocks Soar as NVIDIA’s AI Dominance Faces New Headwinds

The semiconductor sector is abuzz with NVIDIA’s record-breaking quarter, but rising regulatory hurdles and geopolitical tensions are testing the resilience of the GPU giant. Here’s why investors are both betting on AI’s future and bracing for turbulence.

Lead: NVIDIA’s $30 Billion Quarter Ignites GPU Stock Surge
NVIDIA (NVDA) reported a staggering $30 billion in quarterly revenue on April 30, 2025, a 15% jump from the prior quarter and a 122% surge year-over-year. The AI boom has propelled its data center business to new heights, with sales hitting $26.3 billion—driven by hyperscalers like Microsoft and Meta racing to build AI infrastructure. Yet this triumph is shadowed by U.S.-China trade wars and rival chipmakers clawing for market share.

Ask Aime: Is NVIDIA's $30 billion quarter a sign of the AI boom's success?

The Earnings That Redefined Growth Expectations

NVIDIA’s Q2 results were a masterclass in AI’s economic power. The company’s data center revenue grew 154% year-over-year, fueled by demand for its Hopper (H200) and Blackwell (B200) GPUs, which power everything from generative AI models to quantum computing simulations. Gaming revenue also rose 9% sequentially to $2.9 billion, as AI-enhanced features like Project G-Assist drew gamers to RTX-powered PCs.

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But margins are under pressure. Gross margins dipped to 75.1% from 78.4% in Q1, as higher R&D spending and supply chain costs ate into profits. Analysts at BofA noted this could foreshadow tougher times: “Export restrictions on China could slash NVIDIA’s $500 billion long-term market opportunity by 20%,” they warned, highlighting the geopolitical tightrope the company now walks.

Regulatory Storm Clouds Over AI’s Golden Age

NVIDIA’s dominance faces its toughest test yet. A U.S. bill proposed by Representative Bill Foster would mandate “boot-lock” technology on AI chips, disabling them if moved to restricted regions like China. This comes as Washington cracks down on chip smuggling, fearing Beijing’s AI capabilities.

The stakes are enormous: 30% of NVIDIA’s data center revenue comes from Asia-Pacific markets, including China. Even a partial loss of that revenue could erase billions in profits. Yet nvidia CEO Jensen Huang remains defiant: “We’re working with governments to ensure AI’s benefits outweigh the risks,” he said during the earnings call.

Blackwell’s Billion-Dollar Gamble

NVIDIA’s next-gen Blackwell B200 GPUs are its ace in the hole—but their success hinges on scaling production. Each Blackwell server system costs $2 million–$3 million, and with 60,000–70,000 units projected to ship in 2025, this could generate $120–$210 billion in revenue.

However, Taiwan Semiconductor Manufacturing (TSM) must ramp up its advanced CoWoS packaging capacity to 660,000 wafers annually to meet demand. A supply snag here—and Blackwell’s current sold-out status for 12 months—could delay the AI rollout of hyperscalers.

The Rivalry Heating Up

AMD (AMD) and Intel (INTC) are closing the gap. AMD’s Instinct MI300X chips have lured some enterprises with lower pricing, while Intel’s AI-focused Arc GPUs are gaining traction in cloud gaming. AMD’s stock rose 2.21% in May, signaling investor confidence in its AI play.

NVIDIA’s response? A $50 billion share buyback and partnerships like CoreWeave’s adoption of its H200 GPUs. “CUDA’s ecosystem lock-in remains unbreakable,” says Zacks analyst Lisa Schreiber. “But NVIDIA can’t afford to stumble now.”

Conclusion: Buy the Dip, or Bet on the Bust?

NVIDIA’s stock is a paradox: it trades at 16.3x 2028 earnings, historically low for a company with 78% revenue growth, yet faces existential risks from trade wars and rising competition.

The upside: If Blackwell shipments hit 70,000 units and hyperscaler spending stays robust, NVIDIA could hit $195 billion in fiscal 2026 revenue, pushing its stock toward $275—double its May 2025 price.

The downside: A 20% revenue loss to China restrictions (per BofA) would slash that to $156 billion, sending shares reeling.

For now, investors are betting on AI’s unstoppable momentum. But as NVIDIA CEO Huang put it, “The only way to win is to innovate faster than the world changes.” The next six months will test whether they can.