Nvidia’s business dealings in China are set to dominate investor focus as the AI chipmaker reports earnings on Wednesday. The company has been caught in the middle of escalating U.S.-China trade tensions, with Washington’s curbs on chip exports and Beijing’s pushback complicating sales in one of its largest markets. Nvidia recently struck an unusual deal with the U.S. government, agreeing to pay 15% of its China sales for export licenses, a move that has drawn bipartisan criticism.
Despite China’s strong demand for Nvidia’s chips, Beijing has urged domestic firms to scale back purchases over security concerns. Reports suggest Nvidia asked suppliers to suspend production of its China-specific H20 chip, while Reuters disclosed the firm is already working on a more powerful replacement tailored for the Chinese market. Analysts warn that clarity from both governments will be critical in determining the company’s China trajectory. Last year, China contributed about 13% of Nvidia’s revenue.
For the second quarter ended July 2025, analysts expect Nvidia’s revenue to rise 53.2% to $46.02 billion, although the figure falls short of the triple-digit growth previously recorded. U.S. curbs earlier forced Nvidia to slash $8 billion in expected sales, leading to a $4.5 billion charge in the prior quarter. Analysts believe about $6 billion of projected third-quarter revenue could still come from China, though the federal deal may trim gross margins by up to 15 percentage points on China-bound chips.
Nvidia shares have gained more than a third this year, outperforming broader indexes but posting slower growth compared to previous years. Demand for its AI chips remains robust, with tech giants like Meta and Microsoft boosting spending. However, margins are expected to come under pressure, with adjusted gross margin projected to drop nearly four points to 72.1% in Q2. Analysts say positive commentary from CEO Jensen Huang could help lift AI stocks that have recently faced valuation concerns.