Nvidia has a China problem
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Nvidia, the biggest company in the world by market cap, reported world-beating results Wednesday evening. But export controls to China dampened its data center revenue, and that's making investors nervous.
Why it matters: Nvidia is caught in the middle of a Trump trade war that could impact its earnings growth and the trajectory of the entire stock market.
What they're saying: "We need [China] more than they need us," Paul Meeks, managing director and head of technology research at Freedom Capital Markets, tells Axios.
- CEO Jensen Huang sees the Chinese market as a $50 billion opportunity that could grow 50% per year.
- That's why investors want the doors to that market wide open.
Catch up quick: The Trump administration barred exports of Nvidia's H20 chips to China in April.
- The ban was reversed in July after the Nvidia CEO visited the White House and agreed to give a 15% cut of revenue from China chip sales to the U.S. government.
- Nvidia still can't sell its most powerful chips to China, though it is urging the U.S. government for approval.
By the numbers: Export controls pressured its data center revenue, which came in just below Wall Street estimates, at $41.1 billion.
- Part of that was due to a $4 billion reduction in H20 chip sales.
State of play: Nvidia CFO Colette Kress said the company would ship between $2 billion and $5 billion worth of H20 chips in the current quarter.
- The company gets half of its data center revenue from large cloud service providers, which happen to be the other biggest companies in the S&P 500.
- All of those companies have already committed to record AI spending, which could translate to upside for Nvidia.
Zoom out: Nvidia makes up 8% of the value of the benchmark S&P 500.
- If export controls impact Nvidia, the effects could reverberate through the entire stock market.
