Chipmaker Nvidia (NVDA) is expected to bring in $6.2 billion in revenue from China in the first quarter, which would make up more than 14% of its total sales, according to Bloomberg estimates. This figure covers the period ending January 26, before the U.S. banned sales of Nvidia’s H20 chips to China in April. Since China is one of Nvidia’s most important markets, investors are closely watching to see what the company says about how the ban could impact future sales during its earnings report on Wednesday.
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While Chinese revenue is expected to grow 150% year over year, revenue from the U.S. is projected to grow by 60% to $21.6 billion, with total revenue estimated at $43.3 billion. Unsurprisingly, CEO Jensen Huang called the U.S. export ban “deeply painful,” saying that it cost Nvidia $15 billion in lost sales and forced the company to write down $5.5 billion worth of unsellable inventory. That write-down will also lower Nvidia’s gross margins for the quarter. Still, investors are hopeful that the company’s new Blackwell AI chips and a recent deal with Saudi Arabia can help lift the stock after the earnings report.
In addition, analysts from Bank of America and Stifel expect Nvidia to slightly beat earnings expectations for the first quarter, but warn that guidance for the next quarter may be more cautious because of the China ban. Meanwhile, competition from China’s Huawei is growing, and Singapore, which is Nvidia’s second-largest market, is expected to generate $6.9 billion in revenue this quarter. Interestingly, some of that may be linked to chip smuggling, with DA Davidson estimating that Chinese firms might still make up 20%–40% of Nvidia’s total end customers.
Is NVDA a Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 32 Buys, four Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average NVDA price target of $164.21 per share implies 21.3% upside potential.
