Nvidia Soars on China Chip Win $5T Cap Beckons

Nvidia's stock surged 4% Tuesday after the chip giant announced it expects U.S. approval to resume selling its AI chips, specifically the H20, in China. This breakthrough removes a major overhang and reignites its massive growth potential in a critical market.

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Key Developments:

China Sales Greenlight: Nvidia stated the U.S. government has "assured" it will receive licenses to sell its export control-compliant H20 chips in China, with hopes to "start deliveries soon." A new RTX Pro GPU for smart factories/logistics was also announced as fully compliant.

Massive Market Cap Target: The news prompted Melius Research to raise its Nvidia price target to $235, implying a staggering $5.73 trillion market valuation (up from its recent $4 trillion peak).

Revenue Catalyst: Analysts see this unlocking significant lost revenue. Nvidia previously estimated the China ban cost $2.5B in Q1 and potentially $8B in Q2. Melius expects most of this revenue to return by Q4 FY26, accelerating growth through 2027.

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Financial Upside: Every $10B in recovered China revenue could boost EPS by $0.25. Selling written-down H20 inventory could also push gross margins above the mid-70% target. Bernstein noted potential for $15-20B China revenue recovery in FY26, adding $0.40-$0.50 to EPS.

Strategic Importance: "China is a key market with huge growth potential," Melius emphasized, noting half the world's AI developers are based there. Resuming sales helps Nvidia compete with Huawei locally and globally.

Sector Ripple Effect: AMD shares also jumped 7% after confirming its license applications to sell MI308 chips in China are "moving forward for review," expecting to resume shipments upon approval.

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The Trump administration effectively banned Nvidia's advanced AI chip sales to China in April, citing national security. The resolution, likened by a Treasury official to a "negotiating chip," removes a key barrier. However, uncertainties remain on license scope and potential future policy shifts.

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