The California-based firm posted profit of $26.4 billion on record revenue of $46.7 billion in the recently ended quarter, driven by intense demand for chips from major tech companies powering AI datacenter computing.
While overall revenue significantly increased year-over-year, money taken in from Nvidia's Data Center compute products like its coveted graphics processing units (GPUs) declined 1 percent from the previous quarter.
The drop was driven by a $4 billion decrease in sales of H20 chips—specialized processors the company designed for the Chinese market, according to the earnings report.
For the current quarter, Nvidia projected $54 billion in revenue but said its forecast assumes no H20 sales.
Nvidia's high-end GPUs remain in hot demand from tech giants building data centers for artificial intelligence applications. However, investors are questioning whether the massive AI investments are sustainable.
"The data center results, while massive, showed hints that hyperscaler spending could tighten at the margins if near-term returns from AI applications remain difficult to quantify," said Emarketer analyst Jacob Bourne.
"At the same time, US export restrictions are fueling domestic chipmaking in China."
Nvidia shares fell slightly more than 3 percent in after-market trading.
US takes a cut
Earlier this month, President Donald Trump confirmed that Nvidia would pay the United States 15 percent of its revenues from sales of certain AI chips to China.
Trump called Nvidia's H20 chips "obsolete," despite their previous targeting under export restrictions.
Beijing has responded by expressing national security concerns about Nvidia chips and urging Chinese businesses to rely on local semiconductor suppliers instead.
Nvidia developed the H20 specifically for export to China to address US concerns that its top-tier chips could be used for weapons development or AI applications in the rival nation.
"There is interest in our H20s; we have supply ready to ship," Nvidia chief executive Jensen Huang said of the China market, which he estimated to be a $50 billion opportunity for Nvidia this year.
"We're still waiting on several of the geopolitical issues going back and forth between the governments and the companies trying to determine their purchases and what they want to do."
Huang said Nvidia is talking with the Trump administration about the importance of US companies being able to compete in China.
"We just have to keep advocating the sensibility of, and the importance of, American tech companies to be able to lead and win the AI race and help make the American tech stack the global standard," Huang said.
Fortune in play
The earnings report comes amid market worries about an AI spending bubble that could burst and hurt the chip giant's fortunes.
Nvidia serves as a bellwether for the AI market and became the first company to reach $4 trillion in market value last July.
"We're just seeing just enormous amount of interest in AI and demand for AI right now," Huang said on an earnings call.
The top four cloud computing service providers are on pace to spend about $600 billion on AI infrastructure this year, and it's reasonable to think Nvidia is in line for a lot of that money, Huang reasoned.
(AFP, August 28, 2025)
