Nvidia at Heart of AI Race Between US and China

Anna Ashton, founder of Ashton Analytics and an expert on China, discusses the complicated geopolitical landscape facing Nvidia as the chipmaker tries to curry favor with the Trump administration. Ashton also talks about the new sanctions levied on India and the relationship between India and China.

An unconventional plan by the Trump administration to charge a 15% commission on Nvidia Corp. AI chip sales to China hasn’t progressed beyond the early stages and could pose legal risks, according to the company.

The US government hasn’t indicated how it will put regulations in place that require the chipmaker to make the payments, Nvidia said late Wednesday. Discussions between Nvidia and the government are ongoing, according to Chief Financial Officer Colette Kress.

The administration aims to take the 15% commission in return for allowing Nvidia and rival Advanced Micro Devices Inc. to offer AI chips in China again. The US government had blocked such sales in April, before agreeing to grant the necessary licenses earlier this month.

If the plan isn’t codified, Nvidia should be able to proceed with China sales without paying the commission, Kress said in an interview. “We have been communicating,” she said. “If nothing shows up, I’ve got licenses. I don’t have to do this 15% until I see something that is a true regulatory document.”

Spokespeople for the White House and the Commerce Department, which oversees US export control programs, didn’t immediately respond to requests for comment.

Nvidia Corp., the world’s most valuable company, gave a tepid revenue forecast for the current period, signaling that growth is decelerating after a staggering two-year boom in artificial intelligence spending.

Sales will be roughly $54 billion in the fiscal third quarter, which runs through October, the company said in a statement Wednesday. Though that was in line with the average Wall Street estimate, some analysts had projected more than $60 billion.

The outlook adds to concern that the pace of investment in AI systems is unsustainable. Difficulties in China also have clouded Nvidia’s business. Though the Trump administration recently eased curbs on exports of some AI chips to that country, the reprieve hasn’t yet translated into a rebound in revenue.

Analysts largely looked past the outlook, with at least 10 firms raising their 12-month price targets after the results Wednesday. They raised the estimates by an average of 3% to $202.60, according to data compiled by Bloomberg, implying a gain of about 12% from Wednesday’s close.

Nvidia shares fell 1.9% at 9:52 a.m. in New York on Thursday after briefly rising at the open. They had rallied 35% this year through the close, lifting the company’s market capitalization above $4 trillion.

During a conference call with analysts Wednesday, the company’s leadership rejected the notion that interest in deploying AI infrastructure was flagging.

“The opportunity ahead is immense,” Chief Executive Officer Jensen Huang said. “We see $3 trillion to $4 trillion in AI infrastructure spend by the end of the decade.”

The company also approved an additional $60 billion in stock buybacks. Nvidia had $14.7 billion remaining under its previous repurchase plan at the end of the second quarter.

Sales in that period, which ended July 27, rose 56% to $46.7 billion. That compared with an average estimate of $46.2 billion. Though the gain added more than $16 billion in quarterly revenue from a year earlier, it was the smallest percentage increase in more than two years.

Second-quarter profit was $1.05 a share, minus certain items. Wall Street was looking for $1.01.

The data center unit, a division that’s now larger by itself than any other chipmaker, had sales of $41.1 billion. That compares with an average estimate of $41.3 billion. Gaming-related revenue — once Nvidia’s main source of income — was $4.29 billion. Analysts projected $3.8 billion on average. The automotive segment generated $586 million in sales, a bit shy of estimates.

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