NVIDIA’s AI Dominance Holds Steady Amid China Headwinds as Tech Giants Spend Big

NVIDIA’s (NASDAQ: NVDA) position as the backbone of the global AI revolution remains unshaken, even as geopolitical tensions and regulatory hurdles shrink its China revenue. While U.S. export restrictions and rising competition from Chinese rivals like Huawei have dented sales in the world’s second-largest economy, the chipmaker is benefiting from a tidal wave of AI infrastructure spending by U.S. tech giants and European governments. The result? NVIDIA’s Data Center division now accounts for 90.5% of total revenue, with U.S. sales surging to 44% of its global business—a stark reversal from just two years ago when China contributed 26% of its top line.

The China Challenge: Regulations and Rivalry

NVIDIA’s China revenue has plummeted to 16% of total sales in fiscal 2024, down from 26% in 2022. The U.S. export restrictions on advanced AI chips like the H100 have forced NVIDIA to rely on older models in China, while competitors like Huawei aim to close the gap. Reports suggest Huawei plans to test a new AI chip in 2025 that could rival NVIDIA’s offerings, though analysts caution that replicating NVIDIA’s ecosystem will take time.

The impact is financial: NVIDIA booked a $5.5 billion charge in Q1 FY25 due to China sales declines. Yet the company’s Q2 FY26 results show a partial rebound, with China revenue rising to $1.37 billion (15% of total), driven by demand for its A100 and H100 GPUs. Still, geopolitical risks linger. “NVIDIA’s China exposure is now a double-edged sword—volatile but manageable,” said one semiconductor analyst.

U.S. Tech Giants Fuel Growth

While China’s market shrinks, NVIDIA is cashing in on the AI arms race among U.S. giants. Meta, Microsoft, and Amazon are pouring billions into data centers powered by NVIDIA’s GPUs, driving record revenue:

• Meta: Its 2025 capital expenditure rose to $72 billion, with AI infrastructure accounting for over $2 billion annually by 2026.
• Microsoft: Azure’s AI-driven growth hit $42.4 billion in Q3 FY25, up 33% year-over-year, fueled by NVIDIA’s HGX platforms.
• Amazon: AWS’s AI spending pushed its Q1 CapEx up 75% YoY to $24.3 billion, targeting a $100 billion annual CapEx goal.

These investments are reflected in NVIDIA’s financials: Q1 FY26 revenue hit $43 billion, with analysts forecasting 48% growth in FY2026. The Data Center division alone generated $2.79 billion in Q2 FY26 from China, a sign that even under restrictions, demand persists.

Europe’s AI Push: A Growth Opportunity?

The EU is another battleground. While its €200 billion InvestAI plan aims to reduce reliance on U.S. tech, European firms still depend on NVIDIA’s GPUs. France’s Mistral AI, for example, is building a decarbonized data center—but it’s still using NVIDIA hardware.

The EU’s AI spending is tilted toward software and services (60% of total), but hardware growth is picking up, with a projected 10% rise in 2025. Yet challenges remain: EU companies face a semiconductor design gap, and late-stage funding for startups often flows from U.S. investors.

Risks and the Long Game

NVIDIA’s valuation is a sticking point. At a 13.3x forward Price/Sales ratio, it trades at a premium to the semiconductor sector’s average. Skeptics argue that geopolitical risks and slowing China growth could crimp margins. Meanwhile, Huawei’s progress and the EU’s dependency on U.S. hardware highlight vulnerabilities.

But the long-term picture is clear. NVIDIA’s $35.58 billion in Data Center revenue in Q4 FY25 (up 93% YoY) shows its irreplaceable role in AI training. Even as China sales falter, U.S. hyperscalers and European governments are betting on NVIDIA’s GPUs to power the next generation of AI models.

Conclusion: NVIDIA’s AI Monopoly Justifies the Price

NVIDIA’s dominance in AI infrastructure is undeniable. With U.S. tech giants committing $320 billion to AI in 2025—far exceeding the EU’s €200 billion plan—and China’s demand still holding at 15% of revenue, the company’s growth trajectory remains robust. While valuation concerns and geopolitical risks are valid, NVIDIA’s 90.5% Data Center revenue share and $43 billion Q1 FY26 forecast underscore its unmatched position.

Investors should focus on the secular shift toward AI, where NVIDIA’s GPUs are the gold standard. The China slowdown is a speed bump, not a roadblock. As one analyst put it: “NVIDIA isn’t just a chipmaker—it’s the engine of the AI economy.” And engines, even those facing headwinds, keep moving forward.