Why Nvidia’s 4% Stock Stumble Is the Steal of the Century

Disappointing Earnings Masks a Golden Opportunity

Nvidia’s (NASDAQ:NVDA) second-quarter earnings report should have been a cause for celebration. The company posted a record $46.7 billion in revenue, a remarkable 56% year-over-year increase, fueled by skyrocketing demand for its AI accelerators. 

Yet, the market responded with a collective frown. Investors were rattled by the absence of H20 chip sales to China due to U.S. export restrictions and a perceived slowdown in data center growth, leading to concerns that Nvidia’s $4 trillion valuation might be overblown. Since the earnings announcement, NVDA stock has tumbled 4%, reflecting Wall Street’s unease about trade tensions and reliance on a few key customers. 

Pundits argue the stock’s premium price tag is unsustainable in this climate. But if you think NVDA is expensive, you’re looking at it wrong. This dip could be a rare chance to buy into a company poised for explosive growth, as the full story reveals a much brighter outlook.

Robust Growth Despite China Headwinds

The narrative of a China sales collapse doesn’t tell the whole story. While Nvidia reported zero H20 chip sales to China in Q2 due to U.S. export curbs, it still generated an impressive $2.8 billion in revenue from the region. 

This figure stems from non-restricted products like data center hardware, gaming GPUs, networking infrastructure, and robotics compute — a significant jump from the $900 million it generated in Q1. This shift highlights the unrelenting demand for Nvidia’s technology, even under trade constraints. 

Moreover, Nvidia’s Q3 guidance is strikingly robust, projecting revenues of $54 billion (plus or minus 2%), a $7 billion increase from Q2, without any H20 shipments to China. This optimism is driven by the rapid ramp-up of its Blackwell platform and surging demand across other global markets, signaling that the AI revolution is far from losing steam.

Building Out an Arsenal to Unleash

Nvidia said earlier this year had anticipated an $8 billion revenue loss from the H20 ban, but it was still able to offset this somewhat with the $2.8 billion from alternative product sales in China. What it showcases is that even in China, Nvidia’s brand — and portfolio of products — possesses considerable strength. By excluding H20 sales from its Q3 guidance, Nvidia has set a conservative baseline that leaves ample room for upside if trade relations improve. 

Investors also shouldn’t ignore Nvidia’s extreme profitability — margins hover near 74% — and its $60 billion stock buyback plan that underscores its financial depth and resilience. 

Some analysts have noted NVDA’s days inventory outstanding surged in the second quarter, nearly doubling to 106 days from 59. Some have suggested that is a problem, but it really indicates burgeoning demand.

The chipmaker is undoubtedly building up a surplus to support the ramp up (and demand for) its Blackwell and Blackwell Ultra accelerators, but it also suggests Nvidia is stockpiling chips, ready to deploy them the moment China sales resume, potentially adding billions to future revenues.

Undervalued Potential Amid Global Demand

Adding the $2.8 billion in sales Nvidia did generate in China in Q2 to the $8 billion in sales it lost because H20 sales were not permitted, the AI chipmaker’s revenue could have reached $10.8 billion for the period, illustrating the pent-up potential that exists. 

Even without this, Nvidia’s global footprint remains robust, with 99% of Singapore-billed data center revenue coming from U.S. customers, dispelling any fears its technology is skirting export controls.

Further, Wall Street remains exceptionally bullish, with 19 of 20 analysts making a call after the earnings report maintaining a buy or strong buy rating, with 14 of them raising their target prices, according to MarketBeat.

Notable upgrades include JPMorgan, which hiked its target from $170 to $215 per share and Benchmark, from $190 to $220, reflecting confidence in Nvidia’s trajectory. This consensus suggests the market’s 4% pullback may be an overreaction, overlooking the company’s ability to thrive amid adversity. It is also an opportunity for savvy investors.

The Future Does Not Hinge on China

Nvidia’s growth isn’t solely dependent on China. The AI boom continues to drive demand from tech giants like Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), and Amazon (NASDAQ:AMZN), hyperscalers that are pouring hundreds of billions of dollars into AI infrastructure. 

Even a partial resumption of China sales could ignite a significant rally, while the current base case set — zero H20 sales — still supports double-digit growth. This resilience, combined with Nvidia’s leadership in accelerated computing and a forward-looking strategy, positions it as a bargain for long-term investors willing to weather short-term volatility.

Key Takeaway

The demand for Nvidia’s chips remains extraordinarily high, even in China, where $2.8 billion in Q2 sales defy the export ban narrative. This resilience signals that the market for Nvidia’s technology is broader and deeper than trade headlines suggest. 

The eventual normalization of U.S.-China trade relations — likely a matter of time given global economic interdependence — could light a fuse under NVDA stock, unlocking billions in previously stalled revenue. 

Yet, even if trade tensions persist, Nvidia’s global demand ensures profitable growth for the foreseeable future. With tech giants worldwide betting on AI and Nvidia’s unparalleled chip ecosystem, the current 4% dip is less a red flag and more a strategic entry point. 

For investors with a long-term vision, skipping NVDA now could mean missing out on one of the decade’s most transformative opportunities.

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