Nvidia (NVDA) Stock: Nvidia's China Comeback Could Add $15 Billion to Revenue

TLDR

Table of Contents

Nvidia received approval to resume selling H20 chips to China, potentially adding $15 billion to company revenue
Stock surged 29% year-to-date and became first company to cross $4 trillion market cap
Q1 2026 revenue hit $44.1 billion, up 69% year-over-year, driven by data center business
Gross margins declined to 61% from 78.9% in prior year, though management maintains mid-70% full-year target
Analysts expect major tech earnings this week to drive further demand for Nvidia’s AI processors

Nvidia stock climbed as the chipmaker received clearance to resume H20 chip sales to China after months of export restrictions. The development could boost the company’s Chinese revenue to $20 billion for the full year.

The approval marks a turning point for Nvidia’s China operations. President Trump had previously imposed export restrictions on the H20 chips to the world’s second-largest economy.

Analysts believe the China green light adds approximately $15 billion to Nvidia’s top line. This news helped push the stock up 29% year-to-date and made Nvidia the first company to exceed a $4 trillion market capitalization.

The timing couldn’t be better as major tech earnings approach this week. Google-parent Alphabet reports Wednesday, followed by other hyperscalers who are Nvidia’s biggest customers.

Capital Spending Drives Demand

The biggest U.S. hyperscalers are expected to spend $330 billion on capital expenditures in 2025. That represents a 38% increase from the previous year, according to Synovus Trust.

Alphabet alone plans around $75 billion in capex this year. Any upward revision to that figure would benefit Nvidia directly.

OpenAI CEO Sam Altman added fuel to the demand story Sunday. He said ChatGPT would bring “well over” one million graphics processing units online by year-end.

The company primarily uses Nvidia GPUs for training its AI systems. This massive expansion signals continued strong demand for Nvidia’s flagship products.

Financial Performance Remains Strong

Nvidia’s first quarter fiscal 2026 results showed the company’s dominant position intact. Revenue reached $44.1 billion, marking a 69% year-over-year increase.

Data center business drove the growth with $39.1 billion in sales. That segment alone grew 73% annually and remains the company’s key growth engine.

Earnings per share hit $0.81, beating the consensus estimate of $0.75. Analysts project next quarter earnings of $0.94 per share on revenue of approximately $45.59 billion.

The company maintains over 80% market share in AI training workloads. Its CUDA platform acts as the operating system for AI computing, creating a difficult-to-replicate ecosystem.

Cash flow from operations reached $27.4 billion, up 79.1% year-over-year. The company ended the quarter with $53.7 billion in cash and no short-term debt.

Margin Pressures Emerge

Not all metrics showed improvement in the latest quarter. Gross margins fell to 61% from 78.9% in the prior year period.

Management maintains its full-year gross margin target in the mid-70% range. This guidance suggests confidence in the company’s pricing power and cost management.

Competition is intensifying in the AI chip space. However, Nvidia’s integrated approach from hardware to software continues providing competitive advantages.

The company delivers complete AI computing environments rather than individual components. This includes CUDA software, networking solutions, and enterprise tools that customers can deploy immediately.

Analysts currently expect revenue growth of 59.97% and earnings growth of 64.95%. These figures far exceed semiconductor sector medians of 7.14% and 11.08% respectively.

The analyst consensus rating stands at “Strong Buy” with a mean target price of $181.09. This implies roughly 5% upside potential from current trading levels.

Nvidia shares traded up 0.2% at $172.75 in early Monday trading as investors awaited key tech earnings reports throughout the week.

Stay Ahead of the Market with Benzinga Pro!

Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders: