Nvidia Stock Outlook: Will it Maintain Momentum in 1 Year?

Nvidia's market cap is around $4.4 trillion, driven by its dominant position in the AI chip market. The company has delivered outstanding growth due to booming demand for AI chips, with a 68% gain in the past year. Its valuation is high, but it has several catalysts for growth, including massive spending by cloud computing giants and governments, and its access to the Chinese market. Nvidia is expected to generate $15 billion in revenue from China this year, and its addressable market is likely to expand.

Nvidia's recent securing of an H20 AI chip export license to China marks a pivotal moment in the company's trajectory and the broader semiconductor industry. This regulatory shift, announced in August 2025, has significant implications for Nvidia's revenue streams, competitive positioning, and valuation.

The H20 chip, designed to meet Chinese market demands, had been a cornerstone of Nvidia's AI strategy. The U.S. government's reversal of a Trump-era ban in April 2025 initially threatened a $5.5 billion charge, but Nvidia mitigated this by repurposing materials. By July 2025, the Commerce Department began issuing licenses, unlocking a $4.6 billion revenue stream in Q1 2025, with China contributing 12.5% of total revenue [1].

The H20's approval aligns with the Biden administration's export control framework, categorizing chips by performance tiers. The H20's "green zone" status allows license-free exports to Tier 2 countries, positioning it as a strategic bridge to China. With 900,000 H20 units in inventory, Nvidia can now clear its backlog while capitalizing on demand from tech giants like Alibaba and Tencent, which have placed $16 billion orders for 1.3 million units [1].

Nvidia's competitive positioning in China is bolstered by the H20's 20% faster inference performance compared to the H100 (a banned chip), but the company must contend with Huawei's cost advantages and government support. The H20's resumption also strengthens Nvidia's partnerships with U.S. cloud providers like AWS and Microsoft, which are now permitted to supply AI infrastructure to Chinese clients under strict KYC protocols [1].

The H20's regulatory approval could further expand Nvidia's valuation multiples, accelerating revenue growth. Analysts project that the chip's $4.6 billion Q1 performance could scale to $10 billion annually if China's 12.5% revenue share is sustained. This would push Nvidia's price-to-sales (P/S) ratio beyond 15x, a level last seen during its 2023 AI hype cycle [1].

However, risks persist. The U.S. government's AI Diffusion Framework, which restricts higher-end chips to Tier 1 countries, limits Nvidia's ability to fully capitalize on China's demand. Additionally, the H20's potential misuse in supercomputing clusters—exceeding U.S. export thresholds—could trigger regulatory pushback [1].

The H20's approval reflects a broader U.S. strategy to manage AI diffusion while preserving strategic advantages. By allowing controlled access to mid-tier chips, the administration aims to prevent China from fully decoupling from U.S. technology. This approach mirrors the EU's recent AI Act, which emphasizes collaboration over confrontation [1].

Yet, the decision is not without controversy. A coalition of 20 security experts has labeled the H20's export a "strategic misstep," arguing it could erode U.S. technological leadership. Nvidia's rebuttal—that restrictions accelerate China's self-reliance—highlights the tension between economic pragmatism and national security [1].

Investors should consider a core position in Nvidia, hedged against macroeconomic risks and geopolitical volatility. The AI revolution is far from over, and Nvidia's ability to adapt to regulatory and competitive pressures will determine its place at the forefront [1].

References:

[1] https://www.ainvest.com/news/nvidia-h20-license-breakthrough-strategic-inflection-point-ai-dominance-shareholder-2508/
[2] https://moneymorning.com/2025/08/08/amazon-ceo-andy-jassy-just-delivered-phenomenal-news-for-nvidia-investors/