Nvidia's Strategic Pivot: H20 Resumption Signals AI Leadership and Market Rebound

The U.S. government's conditional greenlight for Nvidia's H20 chip sales to China marks a critical turning point for the AI chip leader. After enduring $4.5 billion in inventory write-downs and $8 billion in lost revenue due to export restrictions, Nvidia now faces a pivotal opportunity to reclaim momentum. This shift, combined with the launch of its China-compliant RTX PRO chip and evolving U.S.-China tech policies, positions NVDA as a compelling buy for investors seeking exposure to AI's growth while navigating geopolitical headwinds.

1. Regulatory Easing: A Lifeline for Revenue Recovery

The Trump administration's decision to grant licenses for H20 exports signals a strategic recalibration of U.S. tech policy. While export controls remain stringent, the move reflects recognition that stifling trade entirely risks ceding China's $17 billion AI market to rivals like Huawei. Nvidia's Q1 FY2026 results highlighted the stakes: $4.5 billion in H20 inventory charges and an $8 billion revenue hit underscored the urgency of resolving regulatory gridlock.

The resumption of H20 sales, expected imminently, could catalyze a rapid recovery. The $18 billion backlog of unsold H20 orders—stymied since 2024—offers a near-term earnings boost. Analysts estimate that resolving inventory overhang could add $10-$12 billion to FY2027 revenue, assuming licenses are fully implemented. Crucially, the Trump administration's emphasis on “selective engagement” with China avoids a full-scale trade war, preserving Nvidia's ability to serve a market that accounts for 13% of its revenue.

2. RTX PRO: A Compliance-Driven Competitive Edge

While the H20's revival addresses the past, the RTX PRO chip (launching in September 2025) represents Nvidia's future in China. Designed to comply with U.S. export rules, the RTX PRO 6000 Blackwell Workstation Edition offers 96GB of GDDR7 memory and 4,000 TOPS AI performance—while omitting restricted features like NVLink. This balances regulatory compliance with demand for cost-effective AI infrastructure.

Competitively, the RTX PRO targets industries like smart manufacturing and logistics, where China's state-backed “New Infrastructure” plans are pouring $1 trillion into AI-driven upgrades. Huawei's Ascend chips, though cheaper, lack the CUDA ecosystem's software flexibility and struggle with complex model training. Nvidia's software lock-in—critical for developers of large language models—remains insurmountable. With pricing starting at $6,500, the RTX PRO also undercuts premium alternatives like AMD's MI300X, positioning it as a mid-tier juggernaut.

3. U.S.-China Tech Policy: Compromise to Preserve Dominance

The broader policy shift favoring compromise is evident in recent regulatory changes. The U.S. scrapped Biden-era AI diffusion rules, replacing them with targeted controls focused on China while easing restrictions for allies like Saudi Arabia. This pragmatic approach acknowledges that outright bans risk backfiring: Chinese firms are already relocating operations to Singapore to access U.S. tech, as seen with cloud provider Manus.

For Nvidia, this means a path forward without total dependency on China. The Trump administration's dual-track strategy—maintaining export bans on cutting-edge chips like the H100 while allowing sales of downgraded models—ensures American tech remains indispensable. Meanwhile, U.S. allies in the Gulf and Europe are ramping up AI spending, offsetting China-related risks. This balance reduces the tailwind of “decoupling” fears, creating a multi-market growth engine for Nvidia.

Investment Thesis: NVDA as the AI Chip Leader

Nvidia's resilience is clear: it's forecasting 73% year-over-year Data Center revenue growth despite headwinds. The H20 resumption and RTX PRO launch address both short-term inventory overhang and long-term market share. With a $600 billion market cap, NVDA trades at 40x forward earnings—fair given its 25%+ AI revenue growth. Key risks include lingering regulatory uncertainty and Huawei's niche gains in low-margin markets, but these are outweighed by Nvidia's ecosystem dominance and the Trump administration's pragmatic tech policy.

Recommendation: Buy NVDA. The H20 revival and RTX PRO's launch position Nvidia to capitalize on China's AI infrastructure boom while maintaining global leadership. Historically, when NVDA has beaten earnings expectations, the stock has demonstrated a positive trend, with a 3-day win rate of 30%, rising to 50% over 10 days and 70% over 30 days, indicating strong short-term momentum following positive surprises. With a target price of $500 (up from $420), investors gain exposure to AI's exponential growth and a company uniquely positioned to navigate U.S.-China tech dynamics.

In a sector where regulatory agility defines survival, Nvidia's blend of innovation and compliance is unmatched. This is a stock to hold for the next decade of AI's rise.