Nvidia, AMD Face Billions in Revenue Risk as J.P. Morgan Cuts EPS Outlook

The semiconductor industry is bracing for turbulence as J.P. Morgan analysts slash earnings forecasts for Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), citing U.S. export restrictions and geopolitical headwinds. The new estimates project an 8%–10% hit to both companies’ 2025 earnings per share (EPS), with billions in revenue at risk as trade tensions disrupt their access to China’s AI chip market.

The Math Behind the Cuts

J.P. Morgan’s analysis, led by semiconductor specialist Harlan Sur, quantifies the financial toll of U.S. rules requiring licenses for exporting advanced AI chips to China. For Nvidia, the $5.5 billion inventory charge tied to halted shipments of its H20 GPUs translates to a $15 billion–$16 billion revenue loss. This calculation factors in a 65%–67% gross margin, which J.P. Morgan estimates represents roughly 8%–10% of Nvidia’s anticipated $180 billion in 2025 data center GPU sales.

For AMD, the $800 million charge for its MI308 chips equates to a $1.5 billion–$1.8 billion revenue hit. Applying AMD’s 45%–55% gross margin, this loss accounts for 10% of its projected $16 billion in 2025 data center revenue. Both companies face direct revenue erosion, with J.P. Morgan concluding that merchant AI GPU segments—a category including these chips—will see 8%–10% lower revenue growth in 2025.

Why China Matters (Even as Revenues Decline)

While China’s share of total revenue has shrunk—Nvidia’s exposure dropped to 13% in 2024 from 17% in 2023—the halted shipments represent critical high-margin business. For instance, Nvidia had secured $18 billion in H20 orders before the restrictions, a loss that could account for nearly 9% of its annual revenue. AMD’s MI308, meanwhile, was pivotal to its 69% year-over-year data center revenue growth in late 2024.

The export controls are part of a broader U.S. strategy to curb China’s AI advancements, but the blowback is immediate. J.P. Morgan warns that U.S. chip stocks could drop 10%–15% further if EPS expectations face a 15%–25% downward revision due to trade disputes.

Cloud Growth vs. Geopolitical Drag

The semiconductor sector isn’t uniformly bleak. J.P. Morgan notes that AI-driven segments like data center GPUs—dominated by Nvidia—remain a bright spot, with cloud infrastructure spending projected to surge 40% in 2025. However, companies like Nvidia and AMD are uniquely exposed to China’s market and the volatility of trade policies.

Can New Products Offset the Hit?

Analysts acknowledge potential mitigations, such as Nvidia’s upcoming Blackwell Ultra GPU and AMD’s next-gen MI350 chips. Yet J.P. Morgan’s base-case scenario assumes no near-term relief from export curbs, making the 8%–10% EPS reduction a conservative estimate.

The Bottom Line: Geopolitics Trumps Innovation

The J.P. Morgan analysis underscores a stark reality: even as AI adoption accelerates, the semiconductor industry’s growth hinges on navigating geopolitical minefields. For investors, the 8%–10% EPS haircut for Nvidia and AMD isn’t just a number—it’s a reminder of how trade policies can override technological progress.

With $15 billion at risk for Nvidia and $1.8 billion for AMD, the stakes are enormous. While cloud spending growth offers hope, the path forward remains clouded by trade tensions. Investors would be wise to monitor not just earnings reports, but also diplomatic developments between the U.S. and China.

Final Analysis: J.P. Morgan’s cuts highlight a painful truth for semiconductor giants: innovation alone can’t overcome geopolitical headwinds. With China’s AI infrastructure spending critical to their revenue streams, Nvidia and AMD face a race against time to find alternatives—or hope for a thaw in U.S.-China trade relations. For now, the EPS outlook remains a cautionary tale of how global politics can disrupt even the most promising tech trends.