- Shaved $1 billion off China write-down bill
- 10th straight quarter of consensus beats
- Stock rallies 6% in after-hours trade
AI chips champion Nvidia (NVDA:NASDAQ) appears to be absorbing the shock of Donald Trump’s investment restrictions on China far better than many expected. By thinking on its feet many of the H20 chips earmarked for Chinese labs were repurposed, shaving $1 billion off the $5.5 billion inventory write-down hit flagged in April, bolstering hopes that the firm’s $8 billion hit this quarter might be similarly exaggerated.
Clearly, Nvidia is facing a period of elevated political risk, just like most US companies, perfectly illustrated by a federal court blocking Trump’s proposed reciprocal tariffs targeting key US trade partners. Nvidia said its gross margin of 61% for the quarter would have been 71.3% if not for the China-related charge.
The Trump administration has immediately appealed the decision.
AI GROWTH STORY INTACT
Nevertheless, the results also showed that the long-term investment case in AI remains intact. ‘Global demand for Nvidia’s AI infrastructure is incredibly strong’, said CEO Jensen Huang on the earnings call.
Revenue rose 69% in the quarter from $26 billion a year earlier. Sales in the company’s data centre division, which includes AI chips and related parts, grew 73% on an annual basis to $39.1 billion, accounting for 88% of total revenue, making this the 10th straight quarter of consensus beats.
Microsoft (MSFT:NASDAQ) has ‘deployed tens of thousands of Blackwell GPUs and is expected to ramp to hundreds of thousands’ of the company’s GB200 product, due largely to its relationship with OpenAI, CFO Colette Kress noted.
The market wanted a fresh injection of optimism and got it in spades. No wonder the stock rallied 6% in after-hours trade.
