NVIDIA Corporation Surges on Renewed China H20 Demand Amid US Export Policy Shift

Nvidia's Renewed Surge in China Following US Export Policy Easing#

NVIDIA Corporation (NVDA has experienced a striking uptick in demand for its flagship H20 AI chips in China, catalyzed by the partial rollback of US export restrictions in July 2025. This policy shift has reopened a critical revenue channel that had been significantly constrained under prior regulations. The company’s recent strategic order of 300,000 additional H20 units from TSMC underscores a proactive response to this surge, supplementing its existing inventory estimated between 600,000 and 700,000 units before the policy change. Market estimates suggest that Nvidia could sell approximately 1.8 million H20 chips in China during 2025, nearly doubling the 1 million units sold in 2024, translating into potential revenues between $10 billion and $20 billion for fiscal year 2026.

This rapid expansion in China demand reflects not only the normalization of trade and regulatory relations but also highlights Nvidia's entrenched dominance in AI hardware despite growing competition from domestic players like Huawei. The H20 chip powers advanced AI applications, including cloud computing, autonomous vehicles, and enterprise AI solutions, areas that are aggressively expanding in the Chinese market.

Financial Performance and Growth Metrics Supporting Nvidia’s Strategic Position#

Nvidia's fiscal 2025 performance, as reported in the January 2025 annual results, showcases a remarkable leap in financial metrics underpinning its growth narrative. Total revenue soared to $130.5 billion, more than doubling from $60.92 billion in 2024, accompanied by a gross profit of $97.86 billion representing a 74.99% gross margin, a notable expansion from 72.72% the previous year. Operating income surged to $81.45 billion (operating margin of 62.42%) and net income reached $72.88 billion, yielding a net margin of 55.85%. This exceptional profitability is further reflected in a return on equity (ROE) of 106.92% and a return on invested capital (ROIC) of 75.38%, both indicating efficient capital deployment and strong operational leverage.

The company’s balance sheet remains robust with total assets at $111.6 billion and stockholders' equity standing at $79.33 billion. Net debt is minimal at $1.68 billion, reflecting strong liquidity supported by cash and short-term investments totaling $43.21 billion. Nvidia maintains a solid current ratio of 3.39x, signaling a comfortable short-term liquidity position.

Free cash flow has shown impressive growth, reaching $60.85 billion in FY2025, up from $27.02 billion in FY2024, enabling substantial capital returns including $33.71 billion in share repurchases and dividends paid totaling $834 million. This capital allocation underscores management’s confidence in the company’s growth trajectory and financial strength.

Strategic Impact of US Export Controls and Their Easing#

The US export ban on advanced AI chips to China, enacted under the previous administration, had curtailed Nvidia's ability to sell its most advanced H20 chips to Chinese customers, significantly impacting revenue streams and compelling strategic recalibrations. The July 2025 easing of these restrictions marks a pivotal inflection point, enabling Nvidia to resume and scale sales into the Chinese market under newly established licensing conditions. This development has allowed Nvidia to ramp up production and order volumes, evidenced by the substantial 300,000 unit TSMC order, to satisfy pent-up demand.

This regulatory pivot not only mitigates previous supply chain disruptions but also signals a more stable trade environment, encouraging Nvidia to deepen local partnerships and potentially explore manufacturing or assembly options within China to capitalize on market growth.

Competitive Dynamics: Nvidia vs. Huawei in the Chinese AI Chip Market#

Despite intensifying competition from Huawei’s Ascend AI chips, Nvidia maintains a commanding market position in China. The domestic competition, driven by national strategic imperatives to reduce reliance on foreign technology, has accelerated Huawei's chip development. However, Nvidia's established technological lead, ecosystem, and scale continue to underpin its dominance.

Analysts note that while Huawei's progress introduces competitive pressure, Nvidia's H20 chips remain the preferred choice for high-performance applications, particularly in cloud infrastructure and enterprise AI deployments. The company's strategic agility in adapting to regulatory changes and scaling supply further reinforces its competitive moat.

Market Outlook and Analyst Perspectives#

Market forecasts remain bullish on Nvidia's China prospects. Analysts from Jefferies and other financial institutions have revised upward their 2025 China AI capital expenditure forecasts by approximately 40%, reflecting confidence in Nvidia's ability to capture significant market share post-policy easing. Revenue projections for Nvidia's China operations in fiscal 2026 range between $10 billion and $20 billion, a substantial growth vector within the company's broader AI revenue stream.

Forward-looking valuation metrics reflect expectations of sustained growth with forward P/E ratios easing from 42.36x in 2026 to 23.5x by 2029, indicating anticipated margin expansion and earnings growth as the company scales further.

What This Means For Investors#

• Nvidia's renewed access to the Chinese market via H20 chip sales represents a significant revenue catalyst with robust market demand exceeding 1.8 million units projected for 2025.
• The company's outstanding financial health, exemplified by soaring revenues, exceptional profitability, and strong free cash flow generation, provides ample strategic flexibility to capitalize on growth opportunities and shareholder returns.
• While geopolitical risks persist, Nvidia's demonstrated ability to navigate complex regulatory environments and maintain technological leadership positions it well for sustained competitive advantage.
• The balance sheet strength and capital allocation discipline evidenced by aggressive share repurchases alongside moderate dividend payouts reflect management’s confidence in long-term value creation.

Key Takeaways#

1. Nvidia’s H20 chip demand in China is surging post-July 2025 export policy easing, with sales potentially doubling to 1.8 million units in 2025.
2. Fiscal 2025 financial results exhibit extraordinary growth, with revenues surpassing $130 billion and net income exceeding $72 billion, underpinned by record margins and returns.
3. Strategic response to US export policy shifts has enabled Nvidia to secure supply chain capacity via TSMC, addressing demand and reinforcing market leadership.
4. Despite Huawei’s growing AI chip presence, Nvidia remains dominant in China’s AI hardware market due to technological superiority and ecosystem scale.
5. Forward-looking estimates predict continued revenue and earnings growth, with forward P/E ratios reflecting market confidence in Nvidia’s sustained expansion.

Conclusion#

Nvidia’s ability to swiftly adapt to evolving geopolitical landscapes and regulatory frameworks while scaling its supply chain to meet burgeoning demand in China exemplifies effective management execution and strategic foresight. The company’s robust financial foundation and dominant technological position in AI chips position it to capitalize on one of the fastest-growing global AI markets. Investors should monitor Nvidia’s operational execution, regulatory developments, and competitive dynamics closely, as these factors will materially influence the company’s long-term growth trajectory and market positioning.

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Sources#

• TrendForce: Nvidia reports added 300k H20 orders amid China demand surge
• Investing.com: Nvidia orders 300,000 H20 chips as China demand surges
• Economic Times: Nvidia orders 300,000 H20 chips from TSMC due to robust China demand
• MERICS: Despite Huawei’s progress, Nvidia continues to dominate AI chips market in China
• SeekingAlpha: Nvidia’s China demand and revenue outlook
• NASDAQ: Nvidia stock and H20 AI chip sales in China