NVIDIA's AI Dominance Defies Geopolitical Storms: A Buy for the Long Haul

The U.S. government's April 2025 export restrictions on NVIDIA's AI chips to China were a shot across the bow of global tech geopolitics. Yet, as NVIDIA's fiscal Q1 2026 earnings revealed, the company is not just weathering the storm—it's accelerating toward a future where its dominance in artificial intelligence is unassailable.

The China Dilemma, and Why It Won't Derail the Long Game

The U.S. crackdown has cost NVIDIA $4.5 billion in writedowns for unsellable H20 chips and a projected $8 billion revenue hit in Q2. China's market, once a growth engine, now feels “effectively closed” to NVIDIA's hardware. But here's the critical nuance: China's AI ambitions aren't dependent on NVIDIA's chips—they're dependent on NVIDIA's ecosystem.

The writedown is a one-time charge, and while China's hardware door may be shut, the software and services that power AI are still wide open. NVIDIA's AI software stack—CUDA, Omniverse, and the entire Blackwell platform—is irreplaceable. Even as China builds its own AI infrastructure, it will still rely on NVIDIA's tools to train models and integrate with global systems.

The Global AI Infrastructure Gold Rush

While China's door closes, others are swinging wide. NVIDIA's data center revenue hit $39.1 billion in Q1, a 73% year-over-year surge. The Blackwell GPU—NVIDIA's crown jewel—is now in full-scale production, with hyperscalers like Microsoft, Meta, and AWS racing to deploy it. The GB200 rack system, which can power entire AI supercomputers, is already shipping, and analysts at Morgan Stanley call its adoption a “key driver” for stock performance.

The geopolitical realignment is creating opportunities far beyond China. NVIDIA's $600 billion partnership with Saudi Arabia's sovereign wealth fund to supply 18,000 Blackwell chips to Humain, its AI startup, signals a new era of global alliances. In the UAE, Stargate UAE—a collaboration with G42, OpenAI, and Oracle—will leverage NVIDIA's infrastructure to build the Middle East's AI backbone. Even Taiwan's Foxconn is partnering with NVIDIA to build domestic supercomputers, ensuring supply chain resilience.

Margin Strength Amid the Chaos

Critics point to the $4.5 billion writedown and the $8 billion revenue hit as signs of vulnerability. But strip away the noise: NVIDIA's non-GAAP gross margin would have been 71.3% without the charge, and it's guiding for 71.8–72.0% in Q2. The long-term margin target of mid-70% by late 2025 remains intact.

This is no accident. NVIDIA is shifting its business model toward software and services, where margins are higher and less exposed to geopolitical whims. Its AI-as-a-service offerings, like the Blackwell cloud instances now available on every major cloud platform, create recurring revenue streams. Meanwhile, the writedown is a temporary drag, not a structural issue.

Why the Bulls Are Right

The market's reaction to the earnings—shares up 5% post-report—tells the story. Investors see beyond the China noise to the relentless demand for AI infrastructure. Even as AMD and others nibble at the edges, NVIDIA's ecosystem lock-in is impenetrable. Its software stack, partnerships, and sheer scale in AI supercomputing make it the de facto backbone of the AI era.

Historically, this pattern holds: backtests since 2020 show that buying NVIDIA shares on earnings announcement days and holding for 20 trading days yielded an average return of 4.87%, though with a maximum drawdown of 10.47%. This underscores the stock's tendency to rally post-earnings—a trend reinforced by its Q1 2026 results, where EPS of $0.81 and a 69.2% year-over-year revenue surge to $44.06 billion exceeded expectations. While the Sharpe ratio of 0.16 suggests volatility, the absolute returns align with NVIDIA's role as a core beneficiary of AI's exponential growth.

The $2.5 billion in lost China revenue is a blip compared to the $39.1 billion AI gold rush. And while U.S.-China tensions are a risk, they've already priced into the stock. At current valuations, NVIDIA is a buy for investors who understand that AI isn't a fad—it's the defining technology of our time.

The geopolitical storm will pass, but NVIDIA's AI dominance is here to stay. This is a buy for the long haul.