Nvidia continues to thrive, defying the impact of the Chinese export ban on its business operations.
Nvidia Posts 69% Revenue Growth Despite China Export Restrictions
In a positive quarterly report, Nvidia, the world's largest supplier of AI-specific processors, has surpassed analysts' expectations by recording a 12% quarter-on-quarter revenue increase in Q1, amounting to $44.1 billion. This marks a significant 69% year-on-year growth for the AI specialist. Earnings per share rose 27% year-on-year to $0.76, albeit a 15% quarterly decline.
Despite the strong showing, Nvidia remains cautious about its outlook, citing the impact of stricter US restrictions on AI chip exports to China, which is expected to dampen momentum in the coming quarter. The company anticipates Q2 revenue to reach $45 billion, a marginal 2% increase compared to Q1, which falls short of analysts' average expectation of $45.9 billion. These headwinds from US exports regulations are projected to cost Nvidia approximately $8 billion in revenue.
In after-hours trading on Wall Street, Nvidia's shares saw a 3% rise, indicating investor optimism in the company's likelihood of overcoming these challenges. Although the company expects a slowdown in growth, new opportunities are emerging in other regions due to US government policy. As part of a trade agreement brokered by President Trump, Nvidia is set to supply hundreds of thousands of AI chips to Saudi Arabia, including 18,000 of its flagship "Blackwell" chips to a startup owned by the country's sovereign wealth fund.
The US seeks to curb China's economic and technological advancement through export embargoes. Nvidia's CEO, Huang, recently characterized this strategy as failing, as China's competitor Huawei has merely responded by developing its own chips. Nvidia has released special variants of its AI chips for the Chinese market, but each tightening of US regulations necessitates adjustments to these products. It is expected that a streamlined version of the current "Blackwell" flagship chip, compliant with existing regulations, will soon become available.
In the wake of Nvidia's 69% year-on-year growth, the company is navigating potential challenges originating from stricter US export restrictions on AI chips to China, as highlighted in the quarterly report. The US government's efforts to curb China's economic and technological advancement through export embargoes have triggered a strategic shift, with Nvidia leveraging opportunities in other regions for growth, such as supplying AI chips to Saudi Arabia.
