NVIDIA's AI Moat and Global Infrastructure Surge: Why the $140 Fair Value Misses the Mark

The U.S.-China tech war has reshaped NVIDIA's revenue landscape, but the company's Q1 results reveal a strategic pivot that's underappreciated by the market. While headlines focus on China's declining share of revenue, NVIDIA's diversification into Singapore, the Middle East, and its Blackwell GPU-driven AI infrastructure play are creating a moat that's both wide and deep. Morningstar's $140 fair value estimate may already be outdated. Here's why investors should act now.

Revenue Diversification: China's Decline Is Offset by Geopolitical Gains

NVIDIA's Q1 results showed China's revenue fell to $5.5 billion, or 12.5% of total revenue—down from 14% and 15% in the prior two quarters. Meanwhile, Singapore surged to $9 billion, becoming NVIDIA's second-largest market. This shift isn't just about China's export restrictions; it's a strategic reallocation of demand. Analysts like Gil Luria note that Singapore has become a billing hub for U.S. and European AI projects, with 20–40% of end customers in the region linked to Chinese firms seeking to bypass export controls.

The key takeaway: NVIDIA's revenue mix is diversifying geographically and structurally. The company's $44.1 billion in Q1 revenue (up 69% year-over-year) wasn't just a China story—it was a global AI story.

Geopolitical Tailwinds: The Middle East's Trillion-Dollar AI Play

The U.S.-China tech divide has created a vacuum for NVIDIA to deepen ties with U.S. allies. In Saudi Arabia, NVIDIA is building an 18,000-GPU AI supercomputer for HUMAIN, a $500 million AI factory backed by the Public Investment Fund. The UAE's Stargate initiative—a $50 billion AI infrastructure cluster—will deploy 5 gigawatts of datacenter capacity, with NVIDIA supplying 500,000 GPUs annually. These deals aren't just about hardware sales; they're about sovereign AI infrastructure.

Governments now treat AI as critical infrastructure, and NVIDIA is the sole supplier of chips capable of powering large-scale reasoning models. As CFO Colette Kress noted, losing China's market would cost NVIDIA $8 billion in Q2 revenue, but the Middle East and other regions are filling that gap—and then some.

Why Morningstar's $140 Fair Value Underestimates Blackwell's Potential

Morningstar's adjustment to $140 from $125 reflects optimism about NVIDIA's Blackwell GPUs, which already account for 70% of data center revenue. But here's the rub: the firm's analysis assumes Blackwell's adoption peaks at current levels. That's a critical misread.

Consider:
- Saudi Arabia's 500MW initiative will require thousands of Blackwell chips.
- Taiwan's AI supercomputer with Foxconn and Japan's quantum research project are just the start.
- The UAE's Stargate cluster will eventually need 5 gigawatts of compute, far exceeding current deployments.

NVIDIA's NVLink Fusion—a system to integrate third-party chips into its ecosystem—further strengthens its moat. Competitors like Huawei may nibble at the edges, but they can't match NVIDIA's entire stack of hardware, software, and partnerships.

The Undervalued Upside

NVIDIA's stock has dipped 11.5% from its January high, but its Q1 beat and strong guidance signal resilience. The $2.5 billion China-related loss in Q1 was smaller than feared, and the $4.5 billion H20 write-off is a one-time hit. Meanwhile, Blackwell's scalability is exponential—not linear.

Morningstar's $140 estimate assumes $45 billion in Q2 revenue (its midpoint). But if geopolitical demand outpaces expectations, and Blackwell's adoption accelerates (as it did in Q1), NVIDIA could easily hit $50 billion in revenue by 2026. At that rate, a $200 fair value isn't a stretch.

Final Call: Buy NVIDIA Before the AI Infrastructure Surge

The market is pricing in China's loss but not the global AI infrastructure boom. NVIDIA's moat isn't just about chips—it's about being the only company with the scale, partnerships, and technology to power the next wave of AI.

Action Item: NVIDIA's current price is a buy. The $140 target is a floor. The real question is: how high can Blackwell's global adoption take it?

Historical backtests affirm this opportunity: when buying NVIDIA following earnings announcements and holding until a 10% gain or 30 days between 2020 and 2025, the strategy produced an average return of 27.78%, with a maximum drawdown of -18.19% and a Sharpe ratio of 0.64. This underscores the company's resilience during such strategic shifts.

Backtest the performance of NVIDIA (NVDA) when 'buy condition' is triggered by quarterly earnings announcements, holding until a 10% gain or 30 trading days, from 2020 to 2025.

The AI revolution isn't slowing down. For investors, NVIDIA's resilience—and its unmatched position in the supply chain—makes it a buy at today's levels.