On Wednesday, we await the quarterly report from a company many consider the most important in the world. Investor expectations for Nvidia are already sky-high, but with the resumption of exports to China, the company might surpass them. What can Nvidia’s results tell us about the future of the AI industry?
Since the launch of ChatGPT in 2022, Nvidia’s stock has risen more than 1000%. This growth isn’t based on blind optimism, but on hard numbers. The company’s profits during this time soared from $1.3 billion to $18.7 billion. But the law of large numbers says that the bigger a company gets, the harder it is to maintain the pace of growth. While Nvidia used to shock the world, today the bar is set much higher.
Analysts expect revenues of $46 billion and earnings of $1.01 per share. Founder and CEO Jensen Huang, who has led the company through a period of massive expansion, has a reputation not just for keeping promises but for exceeding them. Nvidia has beaten analysts’ expectations in each of the past eight quarters. Thanks to Huang’s efforts, the company could surprise again this quarter. A new opportunity has opened up – China.
The export of advanced AI chips to China has long been a matter of dispute. The Biden administration restricted it, and Trump even fully banned it this April. Nvidia expected to lose more than $15 billion as a result, writing off $4.5 billion worth of goods in the last quarter.
After the recent resumption of exports, which Huang secured after lengthy negotiations between the two countries, the company is likely trying to recover as much lost revenue as possible and halt the advance of local competitor Huawei. But it doesn’t come for free. Nvidia must hand over 15% of revenues from AI chip sales to China to the U.S. government. This is another way Trump’s administration is trying to profit from U.S. dominance in the global market. Trump’s interest in more government intervention in private corporations is also confirmed by the White House’s recent acquisition of a 10% stake in chipmaker Intel.
Beyond sales to China, it will be important to watch statements on demand in the AI industry. Huang was right when he stressed in past quarters that inference – running AI models – would become a much bigger driver of demand than training them. The recent launch of GPT-5 confirms this. Shortly after launch, OpenAI hit the limits of its computing capacity due to massive demand.
It is not clear, however, how the development of more efficient algorithms and more powerful chips will affect demand. Nvidia itself risks that by creating a more powerful chip, it could devalue the existing investments of its clients, who are already facing criticism about the uncertain profitability of their massive investments in AI infrastructure.
The entire AI industry is betting today that demand will continue to grow at a rocket pace. It is still too early to judge whether this is dangerous optimism or a farsighted bet on the future. Nvidia’s results, however, may give us a clue as to which scenario we’re closer to.
What do you think? Will Nvidia exceed analysts’ expectations? Share your opinion by tagging me @thedividendfund on eToro!
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