Nvidia shares pop on strong AI demand despite hit from China chip restrictions
Nvidia reported strong demand for its AI chips and solid first-quarter results on Wednesday, providing some relief to anxious investors who have come to see the world's leading chip supplier as a bellwether for the overall tech industry.
The Jensen Huang-led company reported earnings of 96 cents per share on sales of $44.06 billion for the quarter ending in April. Both numbers came in higher than Wall Street's expectations, with revenue up 69% compared to one year ago. according to data compiled by LSEG.
However, President Trump's move to slap fresh export controls on Nvidia's shipments to China weighed on its guidance. Nvidia expects revenue of about $45 billion in the fiscal second quarter – with a loss of $8 billion in expected sales of H20 chips that would have been shipped to China.
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3 Nvidia CEO Jensen Huang touted strong demand for AI products.
AFP via Getty Images
Nonetheless, the stock jumped 4% in after-hours trading following the better-than-expected earnings, which were released after the closing bell.
The restrictions on the sale of Nvidia's H20 chips to China, the only AI processors it could legally export to the country, prompted Nvidia to disclose in April that it expected a $5.5 billion charge — temporarily sending the markets into a tailspin.
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On Wednesday, Nvidia said the actual first-quarter charge due to the H20 restrictions was $1 billion less than expected because it was able to reuse some materials.
Huang put a positive spin on the results and described demand for Nvidia's AI infrastructure as 'incredibly strong.'
'Global demand for Nvidia's AI infrastructure is incredibly strong,' Huang said in a statement. 'AI inference token generation has surged tenfold in just one year, and as AI agents become mainstream, the demand for AI computing will accelerate.'
'Countries around the world are recognizing AI as essential infrastructure — just like electricity and the internet — and Nvidia stands at the center of this profound transformation,' Huang added.
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3 Nvidia warned of an $8 billion hit from lost China sales in the second quarter.
AFP via Getty Images
Nvidia said it took a $4.5 billion charge on excess H20 inventory in the first quarter. The company said it would have sold $2.5 billion in additional chips if not for the restrictions.
Nvidia's data center business was a bright spot for the quarter, with proceeds jumping 73% to $39.1 billion.
Nvidia is at the forefront of the current AI boom, with Google, Microsoft, Meta, Amazon, OpenAI and Elon Musk's xAI among the firms that rely on its chips to power the increasingly complex large language models that underpin their AI tools.
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3 Huang put a positive spin on the results and described demand for Nvidia's AI infrastructure as 'incredibly strong.'
REUTERS
Microsoft, Amazon, Meta and Google alone are expected to spend a combined $345 billion this year as they pour resources into the AI race, according to Visible Alpha estimates.
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