Strong in AI, Weaker in China – Mixed Signals from Nvidia's Results
In the second quarter of fiscal year 2025, Nvidia achieved impressive results, although forecasts for the coming months are cooling down investors' enthusiasm. The company's revenue increased by 56% year-on-year to USD 46.7 billion, which was in line with market expectations.Nevertheless, this was the lowest percentage revenue growth in over two years, which may suggest a slowdown in the pace of expansion following a period of intense investment in artificial intelligence.
Problems in the Chinese market
Earnings per share were $1.05, exceeding analysts' forecasts of $1.01. The data center segment generated USD 41.1 billion in revenue, slightly below expectations, while the gaming division surprised positively, reaching USD 4.29 billion versus the forecast of USD 3.8 billion.The automotive segment fared worse, with revenues of $586 million, also below market expectations.
Noteworthy are the problems in the Chinese market, where Nvidia did not realize any sales of H20 chips in the second quarter, which translated into a decline in revenue in this area by USD 4 billion quarter-on-quarter. The company's third-quarter forecasts do not include H20 sales in China due to regulatory restrictions imposed by the U.S. government.The resumption of deliveries depends on obtaining the appropriate permits, and the Chinese market, whose annual value could reach up to $50 billion, remains an area of strategic uncertainty.
Despite these challenges, CEO Jensen Huang remains optimistic about the long-term growth prospects artificial intelligenceHe estimates that global spending on AI infrastructure will reach $3-4 trillion by the end of the decade. In this context, Nvidia is pressing the US administration to allow it to export advanced chips like the Blackwell series to China.
Share buyback program
It is also worth noting the decision to launch a new share buyback program worth USD 60 billion. Nvidia, with a market capitalization exceeding $4 trillion, is currently the most valuable publicly traded company in the world.However, its rapid growth raises some concerns, particularly due to its strong dependence on a few key clients, such as Microsoft or Amazon, and the lack of its own production plants, which makes the company dependent on the Taiwanese giant TSMC.
Despite record financial results and management's positive outlook on the future of AI, the market reacted lukewarmly to the company's third-quarter revenue forecast, which was around $54 billion—in line with analyst consensus but below the most optimistic expectations of over $60 billion. This could signal a plateau after two years of dynamic growth, and Nvidia's continued success will depend on its ability to diversify revenue, increase supply chain control, and navigate a challenging geopolitical environment.
Source: Krzysztof Kamiński, OANDA TMS Brokers