Jensen Huang Just Delivered a Startling Message About Nvidias Future.jpeg
NVIDIA CEO of the company’s future in China during the company’s recent profit report.
It is currently facing the stops of sales to the country, which constitutes 13 % of its revenues last year.
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To use an old saying, the world was Nafidia‘s (Nasdaq: nvda) oyster. The company communicated with the global markets as you wish, as it was selling the most important artificial intelligence chips (AI) and generating explosive growth. But recently, the United States – which begins with the management of former President Joe Biden and continued with current President Donald Trump – has placed certain restrictions.
In 2022, the Biden Administration launched export controls, limiting the types of artificial intelligence chips that can be sold to the main market of China, and then issued earlier this year the base of the spread of artificial intelligence to increase the strengthening of this situation. The Trump administration recently canceled the prevalence base, but said it would replace it with other guidelines soon. Meanwhile, NVIDIA received a notice several weeks ago that it was no longer able to sell the previously approved H20 chips to the Chinese market due to the US government base, which led to billions of dollars in the company.
It is important to remember that in the past fiscal year – the 12 months ending on January 26, 2025 – China represented 13 % of NVIDIA revenues, so if restrictions continue at this level, it will prove growth. For this reason, investors have shown close attention to the comments and plans of the CEO of Nvidia Jensen Huang regarding the situation. He just presented an amazing message during the last profit call. Let’s take a look at what it might mean to the arrow.
Photo source: Getty Images.
NVIDIA specifically designed the H20 AI chip, based on the structure of the voltage, to respect the instructions of the United States government and obtained approval to export it. However, in April, he received a speech from the government that it could not export H20 without a license. The United States has not yet released such licenses for chip companies.
As a result, NVIDIA was left with the H20S unable to export, and announced a $ 5.5 billion fees related to that. In the company’s profit report this week, this reduced to $ 4.5 billion as it managed to reuse some H20 materials. The market share in NVIDIA in China gradually decreased from approximately 95 % to 50 % today.
Now, let’s think about the amazing Huang message about the future of NVIDIA in China.
“China is one of the world’s largest artificial intelligence markets and a starting point for global success,” said Huang. “However, the China market worth $ 50 billion is actually closed to the United States industry. We explore limited ways to compete, but Hopper is no longer an option.”
The company’s financial manager, Colette Chris, said that the possible loss of the AI AI market in China will have a “negative impact on our business.”
Now, let’s think about what this can mean for NVIDIA. It is true that at the worst scenario, the company will lose access to China permanently, and this can prove its ability to grow. But two elements make me optimistic that this scenario will not play.
First, it is important to note that Huang is generally resourceful and proactive. After all, the NVIDIA’s development of H20 quickly led to respect for guidelines and maintaining the presence in China. Therefore, it is clear that his team gives priority to this problem and may find ways to reduce damage.
Second, Huang did not try to reduce the potential impact of closing the door for the Chinese market. It highlights the alarm bell in a very high way and clearly explain how very restricted policies can harm American companies. This can encourage the Trump administration, as it is new guidelines, to change things and allow companies like NVIDIA to some market access.
At the same time, it is important to note that during the last fiscal year, the United States is the largest market for the company, as it has achieved revenue of $ 61 billion out of a total of $ 130 billion. Revenue increased from companies that have bills headlines in all other geographical regions significantly. Therefore, although the full sales of China’s sales are clearly that it would harm NVIDIA growth, the company still continues to progress – and lead – in other areas around the world.
What might mean this for the stock? If the worst scenario occurs, it is possible that it will be burdened on the performance of the stocks, at least in the short term. In a brighter note, I don’t think this is a position that will destroy the long -term NVIDIA value given the company’s leadership in artificial intelligence around the world. However, as we mentioned, I am optimistic that a solution can be found in the middle of the road, allowing NVIDIA at least an opportunity in China, and if this happens, NVIDIA shares may rise.
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Adria Simino has no position in any of the mentioned shares. Motley is a lie that has positions in and recommends NVIDIA. Motley Fool has a disclosure policy.
Jensen Huang has delivered an amazing message about the future of NVIDIA in China originally published by Motley Fool
