NVIDIA Sees 50% Growth in China Market, 10x ROI on AI Infrastructure

During a recent earnings call, NVIDIA's management highlighted the significant opportunities in the China market, particularly the potential to introduce the Blackwell chip. The company's chief executive officer emphasized that the future holds immense opportunities, with rapid growth expected in the coming years. The company's core business in the data center segment, however, continues to face challenges, partly due to reduced revenue from the H20 chip, which was not sold in China during the quarter.

NVIDIA's executive vice president and chief financial officer noted that if geopolitical issues are resolved, the company could see sales of the H20 chip in China reaching 200 million to 500 million in the third quarter. Additionally, some Chinese clients have already received permits in recent weeks. The company estimates that the China market could generate 500 billion in revenue this year, with an annual growth rate of 50%. This growth is driven by the increasing demand for AI technologies and the potential for significant market expansion.

NVIDIA's management also discussed the broader AI market, projecting that AI infrastructure spending could reach 3 trillion to 4 trillion by the end of the decade. This projection is based on the significant investments being made by major cloud service providers and the global trend towards building sovereign AI capabilities. The company's Blackwell chip is expected to play a crucial role in this market, with its advanced features and capabilities driving growth.

The company's chief financial officer highlighted that the Blackwell chip has set a new benchmark for AI inference performance. With the increasing adoption of AI inference and proxy AI across various industries, the AI inference market is expanding rapidly. The Blackwell chip's architecture, including its NVLink and CUDA stack, is designed to address this growing demand by redefining the economics of AI inference. The company estimates that a 300 million investment in GB200 infrastructure could generate 3 billion in token revenue, resulting in a 10-fold return on investment.

NVIDIA's management reiterated its forecast that the non-GAAP gross margin for the year-end is expected to reach the mid-70% range. The company is accelerating its investments to capitalize on the significant growth opportunities in the AI market. The management also noted that the company's products offer exceptional value, providing customers with excellent profitability, which in turn drives growth and margin opportunities.

In addition to the China market, NVIDIA is also seeing significant opportunities in the sovereign AI market. The company estimates that its sovereign AI-related revenue could reach 200 billion this year, more than doubling from the previous year. This growth is driven by various countries investing in local AI infrastructure, data, and talent to develop sovereign AI capabilities. For example, the European Union plans to invest 200 billion euros in building AI factories across several countries, significantly enhancing AI computing infrastructure.