The era of Nvidia’s jaw-dropping earnings surprises may be winding down as the AI chip leader prepares to report first-quarter results on Wednesday amid significant headwinds from U.S. restrictions on China sales. After consistently beating Wall Street’s quarterly revenue estimates—by an average of 4.9% in its last fiscal year and an impressive 12.5% in the year before—analysts and investors are tempering expectations in light of recent geopolitical challenges.
“I don’t think investors expectations are very high as we go into it,” noted Ivana Delevska, chief investment officer of Spear Invest, which holds Nvidia shares in an actively managed exchange-traded fund. This cautious outlook comes as Nvidia grapples with a $5.5 billion charge related to export limits on its H20 chip, the company’s only AI processor previously approved for the Chinese market. CEO Jensen Huang recently disclosed that these restrictions have forced Nvidia to abandon approximately $15 billion in potential sales to China, which accounted for 13% of its revenue last year.
Despite these challenges, analysts still expect robust growth, with first-quarter revenue projected to surge 66.2% to $43.28 billion according to LSEG data. However, the company’s adjusted gross margin is anticipated to drop more than 11 percentage points to 67.7%. The key question for investors remains whether Nvidia can increase sales in other regions enough to compensate for the substantial loss of its China business, particularly as the company explores new opportunities in markets like the Middle East following modifications to certain U.S. export regulations.
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