Yet despite the upbeat outlook, Nvidia’s shares slipped 2.6% in after-hours trading, wiping out roughly $110 billion in market value. The decline reflected investor unease over weaker-than-expected performance in its data center business and stalled growth in China—factors that could temper Nvidia’s AI-driven momentum.
The Santa Clara, California-based company reported second-quarter revenue of $46.74 billion, above the $46.06 billion analysts anticipated. Its data center unit, which generates the bulk of sales, brought in $41 billion, narrowly missing Wall Street forecasts of $41.42 billion. Analysts said cautious spending by major cloud providers raised doubts about whether the unprecedented pace of AI investment can be sustained.
“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 Jacob Bourne, analyst at eMarketer.
Trade Tensions Cloud China Outlook
Nvidia’s growth prospects remain complicated by U.S.-China trade frictions. The company revealed it has excluded shipments of its H20 AI chips—tailored for the Chinese market—from its third-quarter guidance. The decision follows U.S. export restrictions and a recent agreement with former U.S. President Donald Trump’s administration, which allows Nvidia to sell H20 chips in China in exchange for a 15% commission on revenues.
Beijing has warned Chinese firms against importing the chips, and Nvidia is reported to have paused H20 production, adding fresh uncertainty. In May, the company estimated U.S. export curbs could cost as much as $8 billion in lost sales for the July quarter alone.
Global Demand Holds Firm
Outside China, appetite for Nvidia’s advanced chips remains strong. A single non-Chinese customer purchased $650 million worth of H20 chips in the second quarter. Nvidia also said it is expanding its share buyback program by $60 billion, signaling confidence in long-term growth despite near-term volatility.
Chief Financial Officer Colette Kress said the company expects $20 billion in 2025 revenue from “sovereign AI” projects, which provide chips and software to governments. She added that global AI infrastructure investment could reach $3 trillion to $4 trillion by 2030, with $600 billion already spent this year.
Tech giants including Microsoft and Meta Platforms—together accounting for roughly half of Nvidia’s latest data center revenue—continue to drive demand as they scale up generative AI applications.
Market Reaction Moderates
The muted stock reaction contrasted with Nvidia’s history of blockbuster earnings rallies since the AI boom began two years ago.
“This is the smallest reaction to an earnings report in Nvidia’s AI incarnation,” said Jake Behan, head of capital markets at Direxion. “While it may not have been a blowout, it’s not a miss.”
Ben Bajarin, CEO of Creative Strategies, added that excluding China from forecasts leaves room for upside if sales resume in the region, calling it a “critical factor to watch” in the coming quarter.
Outlook
As Nvidia navigates regulatory headwinds and competitive pressures, its challenge will be to sustain growth while diversifying demand beyond hyperscalers and China. With next-generation chips such as Blackwell on the horizon and government contracts accelerating, analysts say the company remains central to the AI revolution—even if trade frictions temper its near-term trajectory.