Nvidia Navigates High Expectations as AI Boom Matures, Blackwell Demand Surges Amid China Challenges

Two years after the generative AI boom reshaped the tech landscape, Nvidia finds itself under intense scrutiny from Wall Street as it prepares to report its second-quarter earnings. The company, once best known for gaming GPUs, has transformed into the central pillar of the AI revolution, with revenue more than tripling and profits quadrupling since 2022. Its stock has surged twelvefold since the end of 2022, and it recently became the first company to reach a $4 trillion market capitalization, closing Friday at $177.99 and up 33% this year. Despite its massive scale, growth has slowed. After five consecutive quarters of triple-digit expansion in 2023 and 2024, year-over-year revenue growth fell to 69% in the first quarter of 2024. Analysts now expect a 53% increase in second-quarter revenue, reaching $45.9 billion according to LSEG’s consensus. Data center sales, which made up 88% of total revenue in the first quarter, remain the dominant force behind the company’s success. In 2023, 34% of Nvidia’s sales came from just three unnamed customers, widely believed to be major cloud providers and tech giants like Microsoft, Google, Amazon, and Meta. Nvidia’s Blackwell series, the latest generation of AI chips, is central to its continued dominance. The line includes both individual GPUs and full systems integrating 72 GPUs. Strong Blackwell performance would signal sustained demand from hyperscalers and validate Nvidia’s technological lead. In May, Nvidia reported $27 billion in Blackwell sales, accounting for 70% of its data center revenue—up from $11 billion in the prior quarter. While Blackwell is in high demand, supply constraints, not demand, are limiting availability. The next generation, Blackwell Ultra, is expected to begin shipping in late 2025. Nvidia recently dismissed reports of early production issues with Rubin, its anticipated chip for 2027, reinforcing confidence in its long-term roadmap. The company’s global influence is evident in CEO Jensen Huang’s high-profile travels and diplomatic engagements. He recently secured a deal with former President Donald Trump to regain access to China’s market. Under the agreement, Nvidia will pay 15% of its China chip revenue to the U.S. government in exchange for licenses to export its H20 chip, a China-specific AI processor. Trump initially demanded 20%, but Huang negotiated the lower rate. The H20 is significant—Nvidia estimated it could generate $8 billion in sales during the second quarter. However, due to U.S. export restrictions and Chinese government pressure on cloud providers to adopt domestic chips like Huawei’s, Nvidia did not include H20 sales in its guidance. Analysts at KeyBanc believe the company will continue to exclude it, following AMD’s lead, citing a potential 15% tax on AI exports and regulatory hurdles. Still, the potential inclusion of H20 sales could boost revenue expectations by $2 billion to $3 billion. KeyBanc maintains a “buy” recommendation, though it expects conservative guidance. Meanwhile, Nvidia is developing a new Blackwell-based China chip that will also require presidential approval. As the AI race intensifies, Nvidia’s performance continues to shape investor sentiment across the tech sector. Its influence extends beyond its own results—Wall Street views the company as a barometer for the broader AI economy. With its chips powering models from OpenAI to Anthropic, Nvidia’s trajectory remains pivotal.