• Nvidia is expected to post robust July-quarter results but may issue a conservative October-quarter outlook, excluding revenue from China.
  • The chipmaker's new revenue-sharing deal with the U.S. government imposes a 15% fee on China chip sales, adding a new financial and operational burden.
  • Despite the China headwinds, fundamental supply growth remains strong, with GPU supply up 40% last quarter and Blackwell production ramping.

Nvidia Corp. is navigating a precarious path between blockbuster demand for its artificial intelligence chips and escalating U.S.-China trade tensions, with one Wall Street firm warning that near-term guidance could underwhelm. While the semiconductor giant is anticipated to deliver another strong quarterly performance later this month, its forecast may disappoint investors as it grapples with new regulatory hurdles.

According to analysts at KeyBanc Capital Markets, Nvidia may choose to exclude all China-related revenue from its forward guidance for the October quarter. This cautious approach stems from pending license approvals, the potential for a 15% AI export tax, and mounting pressure on Chinese firms to source domestic chips. Without contributions from the critical Chinese market, KeyBanc suggests the company's outlook could fall short of Wall Street's consensus estimates, even as the firm estimates those sales could otherwise add $2 billion to $3 billion to the top line.

This uncertainty follows weeks of high-stakes negotiations between Nvidia, its peers, and the U.S. government. The parties recently struck an unprecedented revenue-sharing deal, granting Nvidia and AMD licenses to sell certain AI chips in China in exchange for a 15% cut of the revenue from those sales. The agreement, which involved direct talks between Nvidia CEO Jensen Huang and Trump administration officials, is viewed as a novel policy to balance national security concerns with business interests. Efforts to reach a Nvidia spokesperson for comment on the guidance strategy were not immediately successful.

Despite the geopolitical fog, Nvidia's underlying business engine appears to be firing on all cylinders. KeyBanc notes that GPU supply surged by 40% last quarter and is projected to grow another 20% as production of the new Blackwell (B200) architecture ramps up. The even more powerful Blackwell Ultra (B300) is slated to begin shipping in October. Furthermore, rack production bottlenecks are easing, with shipments now on track to reach 30,000 units this year. Based on these robust fundamentals, KeyBanc reiterated its Overweight rating on the stock and raised its price target to $215 ahead of Nvidia's highly anticipated earnings report on August 27.

The situation underscores the new reality for U.S. tech giants operating in China, where regulatory frameworks can shift overnight and become a direct line item on the income statement. For now, investors are left to weigh the company's undeniable operational momentum against the persistent and costly overhang of geopolitical risk.