Nvidia Stock Faces a Choppy Q2, But Tailwinds Build for H2 Acceleration
May 23, 2025
Beth Kindig
Lead Tech Analyst
When you’re Babe Ruth, the crowd expects to see a homerun. Hit a single or a double and the fans go home disappointed. Nvidia has continued to report exceptional earnings results, yet Nvidia stock is competing with itself at this point.
Next week, Nvidia will report fiscal Q1 earnings, and the market has become accustomed to the company reporting a string of homeruns and grand slams. While Q1 results will be propped up by China stockpiling the H20s, the outlook for Q2 is the choppiest the company has faced in two years. This is because Nvidia has a narrower path than usual to impress investors as the Hopper generation demand is waning while Blackwell is (finally) shipping but not at the levels originally expected.
Last quarter, I published the analysis: “Nvidia Suppliers Send Mixed Signals for Delays on GB200 Systems – What it Means for Nvidia Stock.” which stated “Given market jitters around DeepSeek, which turned out to be a non-issue, something more material related to the GB200s, such as growth slowing below expectations at the start of the new fiscal year, could send the stock below $100 -- which we would see as a buying opportunity [...] ultimately, my firm trimmed our Nvidia position (to a 10% allocation) and will happily buy lower should the assumptions in this analysis materialize. Nvidia remains the stock of the decade; however, stock returns – and product launches -- are not perfectly linear.” --February 2025
That analysis played out. We were able to buy Nvidia at $87, issuing a real-time trade alert that has returned 53% on that tranche since early April. We also added several key Nvidia suppliers that have moved sharply higher.
With a strong seven-year track record on this name, I felt it was important to share my perspective as Nvidia Week kicks off on Wall Street.
H20 Export Ban Will Result in $5.5B Inventory Loss and Cost $15B in Revenue
China has dominated the headlines over the past quarter and exactly how Nvidia plans to overcome geopolitical tensions will be a primary focus in the upcoming call. Export controls have been in place for years, hence the H800 and the H20 GPU variants, which were designed to be less powerful GPUs to comply with export restrictions. Yet, the license restrictions were changed in April, resulting in a $5.5 billion inventory loss for Nvidia. More recently, Jensen Huang clarified it would be $15 billion in revenue stating the inventory will have to be discarded.
Here is a brief summary of the USA-China GPU licensing restrictions:
- In 2022, the Biden administration placed export controls on the A100s and H100s due to bandwidth, requiring the bandwidth to be lowered to 400GBps This led to the A800s and H800s.
- In October of 2023, performance requirements were accounted for in the export controls, limiting sales of Nvidia’s A800, H800, L40, L40S and RTX 4090 chips. This led to Nvidia creating the H20 GPUs.
- In April of 2025, the Trump administration has effectively banned the H20s by denying the export license. This is on the grounds that H20s can be used in supercomputers and offers 20% faster inference than the H100s.
While the H20 has reduced compute performance compared to the H100s — including fewer Tensor Cores and lower FP8/FP16 throughput — it retains high-speed interconnect capabilities through its support for NVLink and PCIe Gen4, and features 96GB of HBM3 memory with 4.0 TB/s of memory bandwidth. The 96GB of HBM3 exceeds the H100s, which is large enough for LLM models to run in memory and lower costs. The higher HBM3 also translates to the H20 offering fast communication when clustered with other GPUs for a multi-GPU system supercomputer.
Furthermore, although the H20 performs at roughly 50% of the H100s, it has a power advantage at 400 watts compared to the H100s 700 watts. Partially due to the lower power, while maintaining high-speed bandwidth for inference, means the H20s have remained attractive to Chinese firms especially in the wake of DeepSeek’s R-1 release.
Selling chips to China for use in supercomputers has been prohibited since 2022. Meanwhile, many industry experts believe Chinese firms were stockpiling the H20s to build a large supercomputer. The Institute for Progress, a nonpartisan group, wrote a long-form explanationof the loopholes that were being used, stating: “The United States is about to make another strategic mistake: Allowing three Chinese firms to receive over $16 billion in orders for NVIDIA H20 chips, amounting to over 1.3 million chips. This order is over six times the size of Colossus, the largest compute cluster in the world. It would more than double China’s entire existing stock of H20 chips. If these chips are delivered, they will dramatically increase Chinese firms’ ability to develop frontier AI models and deploy them at scale.”
As far as when the stockpiling began, semiconductor Insights analyst, Claus Aasholm, noted back in December that “The downgraded H20 system, which passes the embargo rules for China, is doing incredibly well. With 50% quarter-over-quarter growth, it is currently Nvidia’s most successful product. The H100 business “only” grew 25% QoQ.”
According to Reuters, analysts had forecast a total of $12 billion in H20 sales for Nvidia's fiscal year ending in January. However, China revenue for the year was significantly higher at $17.1 billion.
However, this pales in comparison to what Q1 and Q2 were about to report in terms of China revenue.
Nvidia Q1 Earnings Preview: Loss of China Revenue Will Sting
In Q1, Chinese tech companies such as Alibaba, ByteDance and Tencent were hurrying to place H20 orders. The Information reported that Chinese Big Tech companies had placed $16 billion worthof H20 chips in the first three months of the year.
This would represent a sudden surge of roughly 3X growth given previous quarters peaked at $5.5 billion:
Nvidia’s China Revenue:
- Q1 2025 ending April 2024: $2.49 billion
- Q2 2025 ending July 2024: $3.67 billion
- Q3 2025 ending October 2024: $5.42 billion
- Q4 FY25 ending Jan 2025: $5.52 billion
Pictured Above: Nvidia’s quarterly revenue in China was $5.4 billion for the October quarter and $5.52 in the January quarter (not pictured).
When Nvidia stated they would see a $5.5 billion inventory charge in Q1, it was suggesting a very high monthly run rate given the export restrictions were only in effect for the remaining three weeks of Q1. According to the SEC filing “First quarter results are expected to include up to approximately $5.5 billion of charges associated with H20 products for inventory, purchase commitments, and related reserves.”
If you view China revenue on a fiscal year basis, then The Information is suggesting that the first three months of the year resulted in nearly as much revenue from China as all of last year at $17.1 billion.
This helps to illustrate Nvidia was filling a lot of Chinese orders very suddenly before the government intervened. This is further supported by the $16B figure from The Information as revenue of that magnitude from China is not seen in prior quarters.
Nvidia Q2 Earnings Guide Likely to be Impacted
Nvidia’s beats have become narrower over the past few quarters. Although it’s not clear what the impact will be in Q2, we have some indication from semiconductor peer AMD that the export ban of the MI308 will be mostly felt in Q2. It's logical to assume Nvidia will disclose something similar in their earnings call.
In the most recent quarter, Nvidia beat by $1.2 billion. At the start of the AI surge, Nvidia beat by $2.4 billion, and had initially raised guidance by $2 billion for a total upward surprise of $4.4 billion if you generously combine the May guidance with the August results.
If we look at fiscal year estimates of $200B and we take the $15B at face value -- meaning there is no other impact further out into Q2 and Q3 (there very well could be if we assume $16B were rushed orders, yet the quarterly run rate was $5.5B, which is a floor for the other quarters) -- then that’s 7.5% of revenue. This is not a reason to run for the hills, but it’s certainly revenue that has to be absorbed by other SKUs with strong potential Q1/Q2 is where the bulk of the impact is felt.
Analysts are preparing for lower QoQ growth with Q2 revenue $2.7B higher than Q1 compared to QoQ increase of $5.6 billion in Q3. Part of this is that Blackwell is (finally) ramping but not at the volume originally expected for this quarter.
Blackwell Revenue May Absorb China Losses
As the Blackwell vs Hopper GPU transition unfolds, investors are watching to see if Blackwell can make up for declining demand for the aging Hopper architecture as the H20 impact dissipates.
Nvidia said in Q4 that it delivered revenue of $11 billion for its Blackwell GPU, marking the fastest product ramp in its history. However, there was not a strong ramp in the GB200 NVL72 racks in Jan-March, with delivery estimates finally increasing in April.
Data from Morgan Stanley places Jan-March GB200 NVL72 rack shipments at ~1,000, while April shipments were estimated to rise sharply to ~1,500, with the majority coming from Foxconn. This aligns with fiscal Q2 GB200 NVL72 rack estimates of 4-5K, up 3-4x sequentially.
Source: Beth_Kindig Twitter
At the midpoint of those estimates, GB200 NVL72 rack revenue would calculate out to ~$13.5 billion at a $3 million ASP, complemented by HGX B200 shipments and other Blackwell products, which likely contributed 70%+ of the $11 billion from Q4.
This means even though Q2 could see a bigger impact from China that Blackwell sales may be able to help absorb these losses. The only hitch is that suppliers are not fully in agreement with that takeaway.
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Below the Paywall is the Following information
- What AI-Related Suppliers and Competitors are Saying Ahead of Nvidia Earnings, including an important supplier correlation that broke down in November and worsened in April.
- The timing of when Big Tech capex will hit peak growth and what this means for Nvidia’s stock
- The I/O Fund’s trading plan for Nvidia including never-before published buy targets over a 12 to 18-month time frame.
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The last time we published our Nvidia price targets in Where I Plan to Buy Nvidia Stock Next, it was to say the stock would trade below $100. The stock topped five days later at $149. This buy plan was perfectly timed before the DeepSeek selloffs. We then reiterated this price target again the very week when Nvidia’s stock was at $138 and traded below $90 a little over a month later. Real-time trade alerts are sent to Members, including when we snagged shares as low as $87. When you layer these granular details on top of our first entry being $3.15 in 2018 -- you will not want to miss the next buy plan our firm is putting into place.
Disclaimer: This is not financial advice. Please consult with your financial advisor in regards to any stocks you buy.
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