Nvidia's $46.7 Billion Quarter Shows the AI Trade Is Alive and Well -- With Caveats
August 29, 2025
Category:
Key Points
Investors are used to seeing Wall Street jump up and down every time
Nvidia
(NASDAQ: NVDA)
reports its quarterly numbers. As demand for its
graphics processing units (GPUs)
continues to grow, to power artificial intelligence (AI) and machine learning applications, Nvidia has grown dramatically in recent years, becoming the biggest publicly traded company in the world with a market capitalization of $4.4 trillion.
However, that reaction didn't happen after Wednesday's report. Nvidia announced strong numbers, with revenue up 56% from a year ago, but investors paused. The stock actually dropped 3% in after-hours trading and was still in the red nearly 24 hours after the report landed.
Clearly, investors didn't get what they wanted when the chipmaker released its earnings. But I have a different take: I think the report shows that the AI space is still growing and still ripe for the picking. And that's even if one of Nvidia's biggest markets stays dark.
Nvidia's earnings report and the China issue
There's a lot to like about Nvidia's report for its fiscal 2026 second quarter (ending July 27). Revenue was up 56% to $46.7 billion. The data center segment led the charge with revenue of $41.1 billion. That's also an increase of 56% from the previous year.
Net income was $26.4 billion, up 59% from the prior-year quarter, when it was $16.6 billion. Earnings per share (EPS) were $1.08, up 61% from last year's $0.76.
The company accomplished all this despite the fact that it was
completely shut out from selling its H20 chips
in China. The chips are made specifically for the Chinese market to comply with U.S. export restrictions against advanced AI semiconductors. The H20 is less advanced than its flagship Hopper H100 chips but can run some AI workloads 20% faster despite their lower power.
The U.S. blocked H20 exports in the spring, leading Nvidia to take a $4.5 billion inventory charge. Earlier this summer, the company disclosed that it had a deal with the U.S. to resume sales in exchange for 15% of revenue from those sales, but it said Wednesday that the deal has not been finalized.
Management said it was able to sell $620 million in H20 chips to a customer outside of China and benefited from a $180 million release of previously reserved H20 inventory, but data center revenue fell 1% on a sequential basis. If the restrictions are eased, the company said, it could ship between $2 billion and $5 billion in H20 chips in the third quarter.
The future lies with Blackwell
Nvidia's H100 chips are the flagship right now. But the company's Blackwell line is the future, and it's a big reason investors should be excited.
The Blackwell chips deliver up to five times the AI performance of Nvidia's Hopper chips, while at the same time using much less energy. That's important to customers with huge data centers.
And the company is already reaping rewards. It said Blackwell sales jumped 17% from the first quarter. CEO Jensen Huang said, "Blackwell is the AI platform the world has been waiting for, delivering an exceptional generational leap -- production of Blackwell Ultra is ramping at full speed, and demand is extraordinary."
The company said it has already signed several major companies to use its Blackwell line, including
Walt Disney
,
Foxconn Technology
,
Hitachi
,
Eli Lilly
, and
Taiwan Semiconductor Manufacturing
. It is also building Blackwell AI infrastructure in France, Germany, Spain, Italy, and the U.K.
How to invest in Nvidia today
When you're looking at Nvidia stock, one of the major questions to consider is China. What will happen if the company is shut out of that market for the long term? China sales made up 13% of revenue last year, coming in at $17.1 billion.
Yes, that's a possibility. The trade war between Washington and Beijing isn't going to go away. Even if the Trump administration finally inks a deal with Nvidia to forgo the export licenses for a 15% cut off the top, Beijing has to be OK with it as well. And right now, Chinese regulators are concerned that the chips could pose a security risk if there's a back door that would allow them to be operated remotely (a claim that Nvidia rejects).
But consider Wednesday's report. Even
without
sales in China, revenue made a huge jump in the quarter: 56%. And there's plenty of reason to believe that those sales are going to continue, according to Dan Ives, a Wedbush Securities analyst and one of the world's top technology company analysts.
Speaking to Bloomberg TV on Thursday, Ives said that Nvidia's results prove the AI boom is just beginning: "I mean, if you look at these numbers, especially when you factor in where China's going to be, I mean, Jensen [Huang] talked about $50 billion, 50%-type growth number. This just shows the next stage of adoption is actually just starting."
I think he's right. With or without China, Nvidia's Blackwell line is going to be huge for the company, giving it fuel for revenue to continue to increase and for its shares to climb even higher. I'm more convinced than ever that this will be a $5 trillion company, perhaps before the end of the year.
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Patrick Sanders
has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia, Taiwan Semiconductor Manufacturing, and Walt Disney. The Motley Fool recommends Hitachi. The Motley Fool has a
disclosure policy
.
