Nvidia's long-awaited return to the Chinese market has begun, but scaled-down expectations and lingering export controls mean the $4.7 trillion chipmaker faces a measured recovery rather than a revenue windfall.
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Nvidia begins China re-entry as export curbs limit $4.7T chipmaker's upside
Nvidia's long-awaited return to the Chinese market has begun, but scaled-down expectations and lingering export controls mean the $4.7 trillion chipmaker faces a measured recovery rather than a revenue windfall.
Nvidia has started shipping select AI chips to Chinese customers for the first time since US export restrictions tightened, though the re-entry remains limited to approved licensees and lower-tier products. The company's H200 chips have received export licenses for certain Chinese firms including ZTE, according to documents reviewed by Reuters, marking the first meaningful crack in what had been a complete freeze on China-bound data-center shipments.
"The China market remains strategically important, but we are operating within the bounds of all applicable export controls," Nvidia Chief Financial Officer Colette Kress said during the company's first-quarter fiscal 2027 earnings call in May. Kress noted that Nvidia recognized no data-center revenue from China in the quarter.
The cautious restart comes as Nvidia delivers its strongest-ever financial results. First-quarter revenue hit $81.6 billion, up 85% year-over-year and beating the $78 billion consensus, with the data-center segment alone contributing $75.2 billion — a 92% jump from a year earlier. Non-GAAP earnings per share of $1.87 topped estimates of $1.77 by more than 5%. For the current quarter, Nvidia guided revenue of approximately $91 billion with gross margins holding at 75%, signaling sustained pricing power despite supply constraints.
The company raised its quarterly dividend 25-fold to $0.25 per share, reflecting confidence in its capital position. Nvidia holds more than $40 billion in net cash.
Export Controls Reshape the Addressable Market
The US export regime, which restricts sales of advanced AI semiconductors to China, has forced Nvidia to halve its Asia buyer list, the Financial Times reported. The company now ships only to customers that have secured individual licenses, a process that has slowed deal velocity and reduced the total addressable market by an estimated $5 billion to $10 billion annually, according to GF Securities analyst Jeff Pu.
The restrictions have created an opening for domestic Chinese chipmakers such as Huawei, whose Ascend series competes in the segments Nvidia can no longer serve. Huawei's 910B chip, built on a 7nm-equivalent process at SMIC, offers roughly 60% of the H100's FP16 performance, according to published benchmarks, though software ecosystem gaps remain a barrier for enterprise adoption.
Memory Bottleneck Compounds the Challenge
Beyond geopolitics, Nvidia faces a supply-side constraint in high-bandwidth memory (HBM), the specialized DRAM stacked alongside its GPUs. The memory price surge has forced Nvidia to reduce the Vera CPU rack specification from 1.5 terabytes per CPU to 768 gigabytes, according to Pu, with LPDDR5X capacity now accounting for 61% of the Vera Rubin 200 rack's memory and storage budget. Pu expects memory to represent 20% of materials cost for AI racks by 2027.
The HBM shortage has benefited memory makers such as Micron Technology, whose stock has surged 682% over the past 12 months, and SK Hynix, the dominant HBM3E supplier. Nvidia Chief Executive Jensen Huang traveled to South Korea twice in the past year to secure supply commitments.
What This Means for Investors
Nvidia shares trade at 22.4 times forward earnings, a significant discount to the company's five-year average, even as analysts expect 90% EPS growth in fiscal 2027 followed by 34% in fiscal 2028. The consensus analyst rating remains Strong Buy, with a mean price target of $301.92 implying 53% upside from current levels. Bernstein's Stacy Rasgon rates the stock a Buy with a $315 target, while Bank of America's Vivek Arya and Oppenheimer's Rick Schafer also maintain Buy ratings.
The China re-entry, while limited, could add $2 billion to $4 billion in annual revenue if license approvals broaden, according to analyst estimates cited in the source material. But investors should temper expectations: the regulatory environment remains fluid, and any expansion of export restrictions could reverse the progress. For now, the market appears to be pricing in a slow normalization — not a reopening bonanza.
This article is for informational purposes only and does not constitute investment advice.
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