Nvidia's Decline: What's Behind the Drop and What It Means for China and Broadcom

Nvidia's stock is falling, with attention on the possibility of resuming sales in China. This could be a significant factor for the company's performance.

Nvidia's stock has been fluctuating, with investors closely monitoring the potential resumption of sales in China. The company's recent earnings report highlighted robust performance, but geopolitical uncertainties have cast a shadow over its future prospects.

Nvidia Corporation (NASDAQ:NVDA) closed at $174.11 on August 31, down 3.34% from its 52-week high of $184.48. The stock's market capitalization stands at $4.24 trillion, with a trailing P/E ratio of 49.46x and a forward P/E ratio of 39.06x [1].

The company's second-quarter (Q2) revenue hit $46.7 billion, surpassing estimates by over $700 million. Earnings per share (EPS) were $1.05, compared to expectations of $1.01. Revenue growth of 55.6% year-over-year (YoY) and 6.1% sequentially underscored the sustained demand for AI products. The Data Center unit, driven by the adoption of the Blackwell architecture, accounted for $41.3 billion in sales, a 56% YoY increase [1].

Despite the strong earnings, Nvidia's stock has been volatile due to the uncertainty surrounding China. The ban on H20 chip shipments has significantly impacted sales, with China accounting for just 6% of Q2 sales compared to 12.2% in the previous year. However, the company sold $650 million worth of H20 chips to a non-Chinese customer, demonstrating the architecture's value outside its intended market. The U.S. government has since granted licenses to Chinese buyers, tied to a 15% revenue-sharing agreement. If shipments resume in Q3, China demand could add $2–5 billion in incremental sales, setting the stage for upside beyond analyst consensus [1].

Nvidia's balance sheet remains strong, with $56.8 billion in cash and $10.6 billion in debt, equating to a current ratio of 4.21. The company generated $42.8 billion in operating cash flow during the first half of FY26 and posted a net income of $86.6 billion over the last twelve months, reflecting a 52.4% margin and a return on equity of 109.4% [1].

Analysts expect Nvidia's EPS to rise from $4.48 in FY26 to $6.34 in FY27, implying a 41% growth rate. This supports a valuation band of $180–$210 under base assumptions, with bull scenarios placing NVDA near $250 and bear cases pushing shares toward $140 [1].

However, competition and geopolitical risks pose challenges. AMD and Intel are accelerating their accelerator strategies, while hyperscalers like Amazon and Microsoft are designing in-house silicon. Inventory has also ballooned to $15 billion, a potential red flag if AI demand decelerates. Nevertheless, Nvidia's integration of CUDA, DGX Cloud, and Omniverse creates high switching costs for developers and enterprises, reinforcing a structural moat beyond hardware [1].

The possibility of resuming sales in China could significantly impact Nvidia's performance. If shipments resume, China demand could add $2–5 billion in incremental sales. However, geopolitical risks remain, with Beijing warning against the H20's adoption. The U.S. government expects 15% of the revenue generated from those sales, but no official regulation requirement has been published yet [1].

In conclusion, Nvidia's stock has been volatile due to the uncertainty surrounding China sales. The company's strong earnings and balance sheet position it well for future growth. However, geopolitical risks and competition pose challenges. Investors should closely monitor Nvidia's real-time chart for confirmation of support levels before scaling in aggressively.

References:
[1] https://www.tradingnews.com/news/nvidia-stock-forecast-nasdaq-nvda-balances-174-usd
[2] https://www.investors.com/research/nvidia-stock-buy-or-sell-now-after-earnings-report-china-chip/
[3] https://www.manufacturingdive.com/news/two-mystery-customers-39-percent-nvidia-q2-revenue-fy-2026/759108/