Nvidia(US:NVDA) ZACKSยท2025-08-13 14:26Core Insights - NVIDIA Corporation has received approval to sell its H20 AI chips in China after a deal with the U.S. government, which is expected to enhance the company's growth prospects in a significant market [1][9] - The agreement requires NVIDIA to pay 15% of total revenues from H20 sales in China to the U.S. government, which may slightly impact margins but opens up a valuable market opportunity [1][4] Market Dynamics - NVIDIA's H20 chips comply with U.S. export control rules while providing strong AI computing capabilities, addressing the demand in China for advanced chips in data centers, cloud computing, and AI development [2] - The company had previously estimated a loss of $8 billion in H20 sales to China due to export restrictions, with a reported loss of $2.5 billion in the first quarter [3] Revenue and Growth Potential - The new arrangement is expected to help NVIDIA recover lost market share in China and boost its global revenue base, with the AI boom in China likely to create steady demand for H20 chips [4] - Revenue contribution from China had dropped 13% in fiscal 2025, but access to this market is anticipated to support overall revenue growth, with a Zacks Consensus Estimate indicating a year-over-year growth of 52.2% for fiscal 2026 [5] Competitive Landscape - Competitors like Advanced Micro Devices (AMD) and Intel are enhancing their capabilities in the AI chip market, with AMD's MI300X GPUs gaining traction and Intel promoting its Gaudi 3 AI chips as cost-effective options [6][7] Financial Performance - NVIDIA's shares have increased approximately 36.4% year-to-date, outperforming the Zacks Computer and Technology sector's gain of 13% [8] - The company trades at a forward price-to-earnings ratio of 36.66, higher than the sector average of 28 [10] - Zacks Consensus Estimates for NVIDIA's fiscal 2026 and 2027 earnings suggest year-over-year increases of about 42.5% and 32.5%, respectively, with recent upward revisions in estimates [11]