This Artificial Intelligence (AI) Stock Could Thrive Despite U.S.-China Trade Pressures

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During President Donald Trump’s initial term, tensions between the U.S. and China on trade matters have been ongoing. However, it’s essential to understand that this isn’t just about tariffs; it’s a battle for dominance in an exciting field – artificial intelligence (AI). This rivalry has resulted in a significant shift as of April 9th, with new restrictions enforced on the export of AI chips to China. As a tech enthusiast, I can’t help but feel that we’re witnessing a pivotal moment in global tech competition!

The recent changes in regulations impact numerous technology companies, among them the AI frontrunner Nvidia (NVDA). The export restrictions imposed by the federal government on such technological items have adversely affected the sales of Nvidia’s highly sought-after graphics processing units (GPUs), which are powerful computer processors that have contributed significantly to Nvidia’s success in the era of AI.

Despite the ongoing trade tussle between the U.S. and China, there are numerous indicators that point to Nvidia’s resilience and potential for continued prosperity. Let me share some insights into the reasons why Nvidia might persist in thriving amidst these challenges.

The impact of China restrictions on Nvidia

The strained ties between the U.S. and China negatively impacted Nvidia. Due to recent export limitations, the company was unable to sell its AI chips intended for China. As a result, they had to record a $4.5 billion loss on unsold inventory from this sector in their first fiscal quarter ending April 27.

In the first quarter, I’m thrilled to share that China accounted for a staggering $5.5 billion of Nvidia’s impressive $44.1 billion revenue pie! If you can imagine, this number could have been even more astounding if not for the restriction that prevented us from shipping an additional $2.5 billion worth of AI products during that same period.

The potential loss of income isn’t the only issue at hand. In fact, Nvidia CEO Jensen Huang emphasized that the artificial intelligence (AI) competition isn’t merely centered on chips; it’s about which overall platform the world relies upon. As this platform expands to encompass 6G and quantum technology, the leadership of U.S. global infrastructure could be at risk.

To put it simply, bolstering American dominance in Artificial Intelligence relies on global organizations adopting U.S. tech systems like Nvidia’s CUDA software, which optimizes GPUs for custom use. However, as per Huang, existing trade barriers hinder this process from unfolding smoothly.

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Nvidia’s resilient business

Despite some substantial obstacles, it’s clear that Nvidia has shown resilience in its business performance. For example, even though there was a decrease in sales in China, the company’s $44.1 billion in Q1 revenue still signified a robust 69% year-on-year increase.

The resilience shown by Nvidia in the face of China sales difficulties is reflected in its stock, which has climbed approximately 30% this year up until July 15. This surge caused its share price to reach a 52-week high of $172.40 on that date. This impressive rise in shares catapulted the company to become the first one to attain a market cap of $4 trillion.

Trump expressed his appreciation for Nvidia’s exceptional stock success. Huang’s frequent visits to the White House and the strong rapport he’s built with Trump give Nvidia a competitive advantage during trade tensions.

Indeed, it’s been made known that the company intends to restart supplying its AI chips to China, as they have received assurance from the U.S. government that necessary licenses will be issued, and they are optimistic about prompt deliveries commencing.

Factors in Nvidia’s favor

Huang acknowledged Nvidia’s resilience in the face of trade disputes, stating, “Despite annual changes in regulations, taxes, tariffs, and policies, we persevered… and no matter what challenges lie ahead, we’ll adapt and thrive.

I personally noticed a robust optimism radiating from the company, as their projected fiscal Q2 revenue stands at an impressive $45 billion. Compared to the $30 billion earned last year, this indicates a substantial growth.

Despite potential slow sales in China, Nvidia’s prosperity looks set to persist, as the US remains its primary market, accounting for approximately $20.7 billion out of a total $44.1 billion in Q1 earnings.

Additionally, our existing AI system, Blackwell, is set to be replaced by the upcoming Vera Rubin technology, scheduled for release in 2026. Vera Rubin is a powerful chip that aims to revolutionize the way AI functions within high-performance computers.

Numerous organizations are hastily setting up data centers equipped with Nvidia’s products to support their AI systems. For instance, European manufacturers are developing an AI-centric facility aimed at enhancing industrial production, which will necessitate around 10,000 Nvidia GPUs. Furthermore, Meta Platforms (formerly Facebook) is said to be erecting multiple data centers that are expected to utilize over a million Nvidia GPUs.

The intense desire for Nvidia’s AI solutions is likely to drive the company’s prosperity over extended periods. It’s worth noting that projections predict the AI market will grow from an estimated $244 billion in 2025 to a staggering $1 trillion by 2031.

Despite the uncertainty surrounding the full recovery of its China operations, Nvidia continues to stand as a significant force in the global AI arena, largely due to advancements like CUDA and Vera Rubin.

The P/E ratio of its stock, at 55, is approaching high levels yet remains substantially lower than that of main competitor Advanced Micro Devices (AMD), which stands at 114. Given the numerous driving forces behind Nvidia’s business expansion, investing in its stock for a long-term horizon appears to be an attractive prospect.

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2025-07-20 15:13