Nvidia (NASDAQ:NVDA) had seemed at risk of missing out on a major revenue opportunity in China due to export restrictions on its AI chips. However, it now appears ready to tap back into the country’s $50 billion AI chip market after all.
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On Monday evening, Nvidia announced in a blog post that it expects to resume sales of its H20 chips, which are specifically designed for the Chinese market. The update comes after a series of high-level discussions involving CEO Jensen Huang and officials from both the Chinese and U.S. governments, including President Trump.
This marks a notable reversal for the company. An export ban that took effect in April had forced Nvidia to write down $4.5 billion in inventory, and as recently as June, management said it anticipated no further revenue from China. The company had also projected it would forgo $8 billion in China-related revenue in FQ2, so the timing of this update likely points to a meaningful rebound starting in FQ3.
While not many details were offered, and the unpredictable nature of the current U.S. regulatory environment leaves room for a possible return to stricter controls if China-U.S. relations deteriorate, William Blair analyst Sebastien Naji now sees an opportunity for upside in the bottom line.
Specifically, the analyst estimates an incremental $0.30 in EPS for fiscal 2026, assuming China revenue reaches around $20 billion for the year, up slightly from $17.1 billion in fiscal 2025, and net income margins stay in line with company averages. Since Nvidia already booked $5.5 billion in China revenue in the first quarter, this would suggest an additional $14.5 billion concentrated in the back half of the year. On top of that, while visibility is still limited, Naji believes there’s potential for gross margin tailwinds in the second half as Nvidia begins selling written-down H20 chips, which would carry minimal COGS (cost of goods sold).
“This will likely make it easier for Nvidia to achieve its mid-70% non-GAAP gross margin target in the second half and should push full-year gross margins above our current 70.3% forecast for the year,” Naji went on to add.
That said, while for investors the return of China revenue is “overwhelmingly a positive,” it also reopens the door to downside risk, should renewed export restrictions once again “drive this opportunity back to zero.”
All told, Naji rates NVDA shares an Outperform (i.e., Buy), although he has no fixed price target in mind. (To watch Naji’s track record, click here)
As for the rest of the Street, Nvidia stock gets the thumbs up from 34 other analysts while 3 Hold and 1 Sell recommendations can’t detract from a Strong Buy consensus rating. The average price target stands at $181.95, factoring in a modest 12-month gain of 6%. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.