Nvidia Navigates Policy Turbulence Ahead of Anticipated Earnings Release

Nvidia (NVDA) experienced a decline of 1.16% last week, marking an overall drop of 3.04% over the past week and a year-to-date decrease of 2.23%. The company's current market valuation stands at $3,201.84 billion.

Nvidia is set to announce its first-quarter financial results on Wednesday after the market closes, making it one of the most anticipated earnings announcements of the season. The company's stock has been volatile this year, facing challenges from export bans to China under the Trump administration and concerns surrounding semiconductor tariffs. However, a last-minute halt to AI distribution rules by the Biden Administration helped stabilize Nvidia's share price near early-year levels, bolstered by Trump's substantial investment announcements during his Middle East visit.

Leading up to the earnings report, Nvidia participated in Taiwan's annual Taipei International Computer Show, showcasing new technologies including a cloud service powered by third-party providers like CoreWeave and Foxconn that allows users to access Nvidia GPUs via the cloud.

Nvidia is projected to achieve adjusted earnings per share of $0.88 for this quarter, with revenues forecasted at $43.3 billion. This compares to an EPS of $0.61 and $26 billion in revenue reported for the same period last year. Analysts anticipate that the revenue from Nvidia's China division will see a significant increase to $6.2 billion, a substantial jump from $2.4 billion during the previous year's first quarter. In the U.S., the company is expected to generate $21.6 billion in sales.

Nonetheless, Nvidia announced it would record a $5.5 billion charge due to the Trump administration's ban on selling its H20 chips to China. Nvidia disclosed this in its regulatory filings last April.

The H20 chip was specifically designed by Nvidia to comply with Biden administration restrictions on exporting AI chips to China. However, when DeepSeek demonstrated the ability to create powerful AI models using non-premium Nvidia chips, it caused unrest in Washington and Wall Street, leading Trump to tighten restrictions on the company's chips, prohibiting sales of H20 to China.

According to insiders, Nvidia is currently working on an updated version of the H20 chip that meets Trump administration performance requirements.

In the press release at the Taipei International Computer Show, Nvidia CEO Jensen Huang criticized U.S. policy, expressing that the policies are ineffective and inadvertently benefit local AI chip manufacturers in China.

The cancellation of AI propagation rules by the Trump administration allowed Nvidia some relief from export restrictions. These regulations were initially set to create a tiered system determining which countries could acquire AI chips and which could not or needed special licensing. The government plans to establish new export requirements in the future.

This development has paved the way for Nvidia's announcement of its intentions to supply the Saudi sovereign wealth fund-backed AI startup Humain with hundreds of thousands of GPUs over the next five years. The announcement was made during Trump's trip to the Middle East alongside plans for a second "stargate" project utilizing Nvidia’s Blackwell system in the UAE.

Bernstein analyst Stacy Rasgon commented in a report to investors, stating, "For investors concerned about the sustainability of AI capital expenditure, the addition of a financially strong, willing, and capable customer with clear strategic goals is promising. Saudi Arabia is aiming to establish itself as a regional and global AI hub."