US-based chipmaker Nvidia reported stronger-than-expected earnings for its latest quarter, but investor sentiment cooled as concerns grew over slowing sales in China and fears of an artificial intelligence (AI) spending bubble. The company posted a record $46.7 billion in revenue and $26.4 billion in profit, driven by surging demand for its powerful graphics processing units (GPUs) used in AI data centers.
Despite the year-over-year revenue growth, Nvidia’s Data Center segment slipped 1% from the previous quarter, largely due to a steep $4 billion drop in sales of H20 chips—processors specifically developed for the Chinese market amid US export restrictions. For the current quarter, Nvidia projected $54 billion in revenue, excluding any contribution from H20 sales, signaling continued uncertainty around its China operations.
Investors reacted cautiously, with Nvidia shares falling more than 3% in after-hours trading on Wednesday. Analysts said the results raised questions about whether the rapid pace of AI-related spending from hyperscale cloud providers is sustainable. “The data center results, while massive, showed hints that hyperscaler spending could tighten at the margins if near-term returns from AI applications remain difficult to quantify,” said Emarketer analyst Jacob Bourne.
Adding to the pressure, the Trump administration has imposed a 15% revenue cut on certain AI chip sales to China, further straining Nvidia’s outlook in one of its most important markets. While CEO Jensen Huang said Nvidia still sees a $50 billion China opportunity this year, Beijing has been urging companies to pivot to domestic semiconductor suppliers for national security reasons, raising fresh doubts about future sales.
Nvidia’s performance remains critical to global AI growth, with Huang noting that top cloud providers are set to spend nearly $600 billion on AI infrastructure in 2025. However, with fears of an AI bubble and geopolitical risks clouding investor confidence, the chip giant—despite its record-breaking earnings and $4 trillion market valuation milestone last July—faces a delicate balancing act between growth and regulation in the months ahead.
Source: Vanguard