NVIDIA: Riding the AI Wave Through Trade Storms

Oliver BlakeThursday, May 29, 2025 9:05 pm ET
66min read

NVIDIA's Q1 fiscal 2026 earnings underscore a paradox: the company is simultaneously a victim of geopolitical tensions and the undisputed architect of the AI revolution. While U.S. export restrictions to China have slashed near-term revenue forecasts by $8 billion, the structural demand for NVIDIA's AI infrastructure remains insatiable. For investors willing to look beyond the tariff clouds, this is a buying opportunity in a sector where NVIDIA's moat is widening, not shrinking.

The $8 Billion Hit Doesn't Erase the $500 Billion Opportunity
Let's start with the numbers. NVIDIA's data center revenue soared to $39.1 billion in Q1, up 73% year-over-year, driven by AI training and inference demand. Even after accounting for a $4.5 billion inventory write-down due to export curbs, the company's non-GAAP gross margin would have been 71.3%—a testament to its pricing power. The $8 billion revenue loss in Q2 stems from halted H20 chip shipments to China, but this is a temporary wound in a market where NVIDIA's AI infrastructure is now seen as essential for industries from healthcare to autonomous vehicles.

Consider the broader AI market: Gartner estimates that global AI software spending will hit $500 billion by 2027.

isn't just a player—it owns the operating system for this new era. Its CUDA software stack, paired with its GPU architecture, has become the de facto standard for training large language models and generative AI systems. Competitors like AMD and Intel are years behind in both software ecosystems and chip performance.

Trade Barriers Can't Stop the AI Tsunami
The U.S. export restrictions have forced NVIDIA to cede 50% of its China market share, but this isn't the end of the story. First, the Chinese market's AI infrastructure spend is still growing—NVIDIA's Singapore revenue surge hints at smuggling channels and alternative distribution routes. Second, the U.S. and allied nations are now racing to build本土 AI infrastructure, with governments like Saudi Arabia and Taiwan partnering with NVIDIA to deploy its Blackwell supercomputers.

Meanwhile, Chinese firms like Huawei are playing catch-up. While their new AI chips rival NVIDIA's H100 generation, they're already outdated compared to the H20 and future architectures. NVIDIA's lead in photonic interconnects, AI inference efficiency, and software tools (e.g., NVIDIA NIM) creates a multi-year advantage.

The market's reaction to NVIDIA's Q1 results—shares rose 4% after-hours—suggests investors see the export curbs as a speed bump, not a roadblock. The $8 billion hit is a one-time drag on a company with $44 billion in quarterly revenue and $26 billion in cash.

Why This Is a Buy Signal
- AI Demand is Structural, Not Cyclical: Every major enterprise, from Microsoft to Johnson & Johnson, is building AI factories. NVIDIA's Blackwell platform and DGX SuperPOD systems are the only scalable solutions available.
- Competitors Are Struggling to Keep Pace: AMD's MI300A lacks the software ecosystem to match NVIDIA's CUDA. Intel's Ponte Vecchio has been delayed for years.
- Geopolitical Risk = Long-Term Opportunity: Countries outside China are now prioritizing partnerships with NVIDIA to avoid supply chain dependence on Beijing. This accelerates NVIDIA's growth in markets like the U.S., Europe, and the Middle East.


Historical backtests reveal that a buy-and-hold strategy triggered by positive earnings surprises has underperformed. From 2020 to 2025, such a strategy would have resulted in a -13.52% average loss over 90 days, with a maximum drawdown of -38.56%. Despite this short-term volatility, NVIDIA's structural AI advantages suggest that current dips are rare buying opportunities in a secular growth story.

Final Analysis: Buy NVIDIA for the AI Decade
The trade wars are a short-term headwind, but NVIDIA's dominance in AI infrastructure is a multi-decade tailwind. With a $1 trillion market cap, it's easy to dismiss the stock as overvalued—but its revenue growth (69% year-over-year) and margin resilience (71% non-GAAP) defy that narrative.

Investors who focus on the $8 billion China loss are missing the bigger picture: NVIDIA is not just a chipmaker. It's the only company capable of delivering the compute power required for the next generation of AI. This is a generational investment in the company defining the future of technology.

Action Item: Aggressively accumulate NVIDIA shares on dips. The AI revolution isn't slowing down—it's just getting started.