Nvidias

Nvidia (NVDA 3.52%) is the most valuable company in the world, with a valuation of $4.1 trillion. Its performance in recent years has been remarkable, with Nvidia still generating over 50% revenue growth in recent quarters — and that’s considered a slowdown for the tech giant.

But when a stock’s valuation reaches such significant proportions, that also means expectations are high. If the company falls short of them, the stock could be vulnerable to a serious correction, especially as investors who are up big may be looking for any signs that it may be approaching a peak, as that could be an opportunity to cash out and lock in as large of a gain as possible.

The problem with Nvidia’s stock is that if there are any notable headwinds or slowdowns in the tech sector, then it could be among the first to endure a big drop in value. And that’s because its revenue isn’t all that diversified.

Image source: Getty Images.

The vast majority of Nvidia’s revenue comes from just six customers

Nvidia has multiple segments that it generates revenue from, including automotive, gaming, professional visualization, and data centers. But its main income source right now is its data center business, which accounted for 88% of the $46.7 billion in revenue it posted in its most recent period, which ended on July 27.

What’s most concerning, however, is the customer concentration risk in that segment. Nvidia’s AI chips aren’t cheap, and it’s primarily the big tech companies that can afford to spend significantly on them. Companies disclose when customers account for a big slice of revenue, and Nvidia says that its two largest customers, which it refers to as just Customer A and Customer B, represented 23% and 16% of revenue for the past quarter, respectively.

But that’s not all. It also noted that there were four direct customers that each made up 10% or more of its quarterly sales. In total, approximately 85% of its revenue was attributable to just six customers. While specific names weren’t mentioned, my guess is that its key customers are big hyperscalers, with the majority of them potentially among the “Magnificent Seven.”

The problem is clear: if there’s a slowdown in AI-related spending, Nvidia’s growth rate could quickly unravel given its exposure to just six customers.

Nvidia’s valuation has come down, but it remains high

Currently, Nvidia’s stock trades at a price-to-earnings multiple of more than 50. Although that premium has come down over the past year and it’s below its five-year average, that’s still a high price to be paying for the AI stock.

Data by YCharts.

Both Nvidia’s sales and profits were up over 50% last quarter, but that hasn’t been enough to give the stock much of a boost. Over the past month, the stock has declined in value by nearly 6% (as of Sept. 17). There could be some resistance from investors to price the stock much higher than where it is right now, given the risks related to the overall economy, its fragility, and the potential for a slowdown in AI spending in the future.

Is Nvidia stock still a good buy?

In just five years, Nvidia has generated life-changing returns of nearly 1,300% for investors. But now with its market cap up around $4.3 trillion, the inevitable questions come up of how much higher it can possibly go. It’s no longer chasing any other stock — it has already become the most valuable company in the world.

I think Nvidia has a fantastic business, and it commands impressive margins, and there’s potentially much more growth out there in the long run due to AI. If you’re looking at holding onto the stock for at least the next five years, then Nvidia can still be a good investment, but I would suggest bracing for the possibility of at least a modest pullback in the near future.

Nvidia (NVDA 3.52%) has built an artificial intelligence (AI) empire thanks to the dominance of its AI chips and its expansion into a wide variety of other related offerings. But the company isn’t isolating itself, and instead, has looked to work with others — even much smaller players — in this AI boom. One company in particular has become a key Nvidia ally, and that’s CoreWeave (CRWV 0.39%).

CoreWeave launched an initial public offering in March, and the stock has since surged about 195%, buoyed by the company’s soaring sales — and its relationship with Nvidia. The AI chip giant held a 7% stake in CoreWeave as of the end of the second quarter, and CoreWeave makes up 91% of Nvidia’s investment portfolio. And CoreWeave’s business relies heavily on Nvidia as the company’s specialty is the following: It rents out Nvidia’s high-powered graphics processing units (GPUs) to customers through its cloud platform.

Now, Nvidia’s latest move — a $6.3 billion deal with CoreWeave — signals something big for shareholders of both companies. Let’s take a closer look.

Image source: Getty Images.

A 1,300% gain

First, though, a quick summary of the businesses of Nvidia and CoreWeave. As mentioned, Nvidia is the AI chip leader, with its GPUs and related products delivering record revenue and earnings over the past few years. Nvidia’s chips offer the highest performance on the market, so tech giants, prioritizing AI success, have rushed to get in on these essential tools. All of this has helped Nvidia stock climb 1,300% over the past five years — and pushed market value past $4 trillion to make Nvidia the world’s biggest company.

CoreWeave, as mentioned, offers customers access to Nvidia compute through its cloud platform. Customers may rent GPUs by the hour or for the long term, and this offers them great flexibility. CoreWeave holds about 250,000 GPUs across 32 data centers and has been the first to make Nvidia’s latest innovations generally available. All of this has translated into outsized revenue growth, with sales tripling in the latest quarter. CoreWeave clearly depends on Nvidia’s success as demand for Nvidia GPUs power its revenue higher — if demand were to decline, not only would Nvidia suffer, but so would CoreWeave.

And this brings me to the latest deal between the two companies. Nvidia signed a $6.3 billion order with CoreWeave, ensuring that the chip leader will buy any cloud capacity that CoreWeave is unable to sell to customers. The deal, extending a 2023 agreement, covers the period through April 13, 2032.

Eliminating a risk

This order signals something different — but significant — for both companies and their shareholders. For CoreWeave, this removes the big risk of the company being stuck with excess capacity. Though the future of AI spending looks bright, any dip in spending, even over a short period, could be costly for the company. So, Nvidia’s agreement to potentially step in means that if any drop in demand happens, it won’t hurt CoreWeave’s sales. As a result, shareholders may breathe a sigh of relief, and cautious investors who have worried about this risk may consider getting in on CoreWeave.

As for Nvidia, this move suggests the company truly is confident about the demand for AI capacity over the next several years. It’s unlikely the tech giant would agree to such a deal if it saw a major slowdown on the horizon. This reinforces Nvidia’s prediction a few weeks ago that AI infrastructure spending may reach $4 trillion by the end of the decade. Nvidia has said in the past that its customers offer it visibility about their upcoming needs — so the chip designer has a good idea of how the demand situation will evolve.

All of this means this latest deal between Nvidia and CoreWeave is fantastic news for shareholders of both companies — for CoreWeave, the agreement lowers risk, and for Nvidia, the agreement confirms that demand for AI is going strong.

Considering this, both of these companies make great AI stocks to buy and hold onto as this AI growth story develops.

Artificial intelligence (AI) chip giant Nvidia (NVDA -2.78%) recently reported strong second-quarter earnings for its fiscal year 2026. Not only did Nvidia beat Wall Street estimates, but the company’s board of directors also approved the addition of $60 billion to its share repurchase program, which will help increase earnings per share by lowering the outstanding share count over time.

Despite what looked like strong numbers, Nvidia’s stock didn’t react too well and fell following the release. Ultimately, there were both positive and negative aspects from the print. Interestingly, I found one aspect to be both the best and worst part of Nvidia’s earnings report.

China remains a big variable

In the second quarter, Nvidia reported $1.05 adjusted earnings per share on $46.74 billion of revenue, both of which beat estimates. Nvidia also guided for revenue in the current quarter to hit $54 billion, about $900 million ahead of Street forecasts. However, investors seemed slightly miffed by performance in Nvidia’s data center business. Despite growing 56% year over year, the number came up slightly short of estimates.

Image source: Getty Images.

Part of the shortfall came from a decline in sales of Nvidia’s H20 chips, which it sells to businesses in China, in accordance with previous government restrictions. The company has not been able to sell its most advanced chips to China over national security concerns, specifically regarding what China might try to build with these AI capabilities.

These concerns have been ratcheted up under the Trump administration, which earlier this year required Nvidia to obtain export licenses in order to sell to China. In the first quarter of the year, Nvidia took a $5.5 billion charge due to prior built-up inventory and purchase commitments.

Nvidia CEO Jensen Huang appeared to be making progress with President Donald Trump, agreeing to give 15% of the company’s China sales to the U.S. government if it could sell in the country. Nvidia is also reportedly building a scaled-down Blackwell chip, which is more advanced than the H20 chip, that the government might allow the company to sell in China. However, right before earnings, media outlets reported that Nvidia had instructed its suppliers to stop making the H20 chips after the Chinese government told domestic companies to avoid Nvidia chips due to its own security concerns.

Management on the company’s earnings call noted that if geopolitical issues are solved, Nvidia could earn an additional $2 billion to $5 billion of revenue from H20 chip sales in the current quarter. But right now, that is not factored into the company’s guidance. Furthermore, Huang said the opportunity in China in 2025 would have been $50 billion “if we were able to address it with competitive products.” He continued, “And if it’s $50 billion this year, you would expect it to grow, say, 50% per year, as the rest of the world’s AI market is growing as well.”

Upside potential

The worst part of the quarter might have been the news about Nvidia having to suspend H20 chip production and seeing the Chinese government tell local companies to avoid Nvidia’s chips. However, there seems to be a real possibility that Nvidia will eventually be able to sell its products in China, and perhaps even more advanced chips than it had been selling.

In my opinion, this is also in a way the best part of the quarter because the stock and company are performing well without revenue from China, which is clearly material. While the government has reservations about selling U.S. chips in China, it probably would prefer a U.S. company to sell them over Chinese companies. The Wall Street Journal recently reported that Alibaba is working on a chip to fill the void left by the H20 chip. While Chinese companies don’t have the same chip capabilities as Nvidia right now, that could change one day.

So the opportunity to eventually reignite a business in a fast-growing market where the opportunity is tens of billions in additional annual revenue growth is the most exciting part of Nvidia’s recent quarter and near-term future prospects. Nvidia currently trades around 38 times forward earnings, which is above its five year average of 34.4.

That’s not cheap, especially for such a large company. However, given that revenue is expected to keep growing at a healthy clip and the potential upside from China, I do think investors can continue to buy the stock, although dollar-cost averaging is likely the best strategy right now with the stock trading at a stretched valuation.

US chipmaker reports revenue of $46.74bn for second quarter, defying fears that AI may be overhyped.

Chip giant Nvidia has set a new sales record, a sign that demand for artificial intelligence remains strong despite fearsthe technology may be overhyped.

Nvidia, the world’s most valuable company, on Wednesday reported revenue of $46.74bn for the three months that ended in July, a rise of 56 percent year-on-year.

Profit for the quarter was $26.42bn, a yearly rise of 59 percent.

Nvidia’s latest earnings report had been hotly anticipated as the tech giant is widely seen as a barometer of the AI boom, which has lifted the US stock market from all-time high to all-time high.

Nvidia CEO Jensen Huang said that production of Blackwell Ultra, Nvidia’s latest platform using its most advanced chips, was ramping up “at full speed” and demand for the company’s products was “extraordinary”.

“The AI race is on, and Blackwell is the platform at its centre,” Jensen said.

Looking ahead, the Santa Clara, California-based tech giant predicted revenue of $54bn, plus or minus 2 percent, for the July-September quarter, which would be slightly above market expectations.

Despite the robust results, Nvidia’s stock price fell more than 3 percent in after-hours trading, an indication of the sky-high expectations attached to the chipmaker, which is valued at more than $4.4 trillion.

Nvidia’s sales notably did not include any shipments to China, whose market is subject to US government export controls intended to blunt Beijing’s ability to develop AI.

US President Donald Trump’s administration earlier this month lifted a ban on sales of Nvidia’s H20 chip, which was designed specifically for the Chinese market, following concerted lobbying by Huang.

As part of its agreement with the Trump administration, Nvidia agreed to pay the US government 15 percent of revenues from chip sales in China.

The lifting of the ban on the H20 raises the possibility that Nvidia could have potentially enormous untapped sales potential in the world’s second-largest economy, though its prospects have been complicated by a recent directive by Beijing urging local firms against doing business with the company.

“Just imagine what will happen to this stock if the China business even comes half back to life,” The Kobeissi Letter, a newsletter following capital markets, said.

“Jensen Huang will undoubtedly be working overtime on the China situation. The AI Revolution is in full swing.”

Fuelled by explosive demand for its AI, Nvidia’s revenue has grown at breakneck speed over the past two years.

The company posted triple-digit revenue growth for five straight quarters between mid-2023 and 2024.

Since the start of 2023, the price of Nvidia shares has multiplied more than 11 times over, with the stock up more than 30 percent so far this year.

The firm’s stellar performance, underpinned by multibillion-dollar AI investments by tech giants including Microsoft, Meta and Amazon, has stoked discussion about whether AI could be in a bubble.

In an interview with The Verge earlier this month, OpenAI CEO Sam Altman, who oversaw the release of the groundbreaking AI model ChatGPT, said he believed that investors were “overexcited” about the technology.

Chinese authorities have summoned domestic companies, including major internet firms Tencent and ByteDance, over their purchases of Nvidia’s H20 chips.

Authorities asked the companies on Tuesday to explain their reasons and expressed concerns over information risks, three people familiar with the matter told the Reuters news agency.

The Cyberspace Administration of China (CAC) and other agencies also held meetings with Baidu and smaller Chinese tech firms in recent weeks, said one of the two people and a third source.

The Chinese officials asked companies why they needed to buy chips made by Nvidia, a US company, when they could purchase from domestic suppliers, the sources said.

Authorities in China expressed concern that the materials Nvidia has asked companies to submit for review with the US government could contain sensitive information, including client data, one of the sources said.

However, the people, who declined to be identified because the meetings were not public, said the companies have not been ordered to stop buying H20 chips.

Nvidia said on Tuesday that the H20 chip was “not a military product or for government infrastructure”.

“China has ample supply of domestic chips to meet its needs. It won’t and never has relied on American chips for government operations, just like the US government would not rely on chips from China,” the statement said.

Baidu, ByteDance, Tencent and the CAC did not immediately respond to requests for comment.

Discouraged use

Earlier on Tuesday, Bloomberg News reported that Chinese authorities have urged domestic companies to avoid using Nvidia’s H20 chips, particularly for government-related purposes.

Several companies were issued official notices discouraging the use of the H20, a lower-end chip, mainly for any government or national security-related work by state enterprises or private companies, the report said, citing people familiar with the matter.

In a separate report, The Information reported that ByteDance, Alibaba and Tencent had been ordered by the CAC in the past two weeks to suspend Nvidia chip purchases altogether, citing data security concerns.

The CAC directive was communicated at a meeting the regulator held with more than a dozen Chinese tech firms, shortly after the administration of United States President Donald Trump reversed the export curbs on H20 chips, according to the Information report.

Reuters could not immediately confirm the reports, and Alibaba did not respond to a request for comment. Top contract chipmaker SMIC rose 5 percent on Tuesday on expectations of rising demand for locally-produced chips.

But even without an outright ban, the concerns expressed by Chinese authorities could threaten Nvidia’s recently restored access to the Chinese market as Chinese companies look to keep in step with regulators.

Nvidia designed the H20 specifically for China after export restrictions on its more advanced AI chips took effect in late 2023. The H20 has since been the most sophisticated AI chip Nvidia was allowed to sell in China.

Earlier this year, US authorities effectively banned its sale to China, but reversed the decision in July following an agreement between Nvidia and the Trump administration.

Threat to revenue stream

Last month, China’s cyberspace regulator summoned Nvidia representatives, asking the company to explain whether the H20 posed backdoor security risks that could affect Chinese user data and privacy.

State-controlled media have intensified criticism of Nvidia in recent days. Yuyuan Tantian, affiliated with state broadcaster CCTV, published an article on WeChat over the weekend claiming that H20 chips pose security risks and lack technological advancement and environmental friendliness.

The scrutiny threatens a significant revenue stream for Nvidia, which generated $17bn from sales to China in its fiscal year ended January 26, or 13 percent of total revenue.

China has accelerated work on domestic AI chip alternatives, with companies such as Huawei developing processors that rival the H20’s performance, and Beijing urging the technology sector to become more self-sufficient.

However, US sanctions on advanced chipmaking equipment, including lithography machines essential for chip production, have constrained domestic manufacturers’ ability to boost production.

On Monday, US President Donald Trump suggested that he might allow Nvidia to sell a scaled-down version of its advanced Blackwell chip in China, despite deep-seated fears in Washington that Beijing could harness US AI capabilities to supercharge its military.

China’s Ministry of Foreign Affairs said on Tuesday that it hoped the US would act to maintain the stability and smooth operation of the global chip supply chain.

The Trump administration last week confirmed an unprecedented deal with Nvidia and AMD, which agreed to give the US government 15 percent of revenue from sales of some advanced chips in China.

China’s renewed guidance on avoiding chips also affects AI accelerators from AMD, Bloomberg also reported. It was not clear, however, whether any notices from Chinese authorities specifically mentioned AMD’s MI308 chip.

AMD did not respond to a request for comment outside regular business hours.

Jensen Huang says Trump administration has assured his company it will be granted licences to export advanced chips.

Nvidia CEO Jensen Huang says the technology giant has won approval from United States President Donald Trump’s administration to sell its advanced H20 computer chips, used to develop artificial intelligence, to China.

The news came in a company blog post late on Monday, and Huang also spoke about the coup on China’s state-run CGTN television network in remarks shown on X.

“The US government has assured Nvidia that licences will be granted, and Nvidia hopes to start deliveries soon,” the post said.

“Today, I’m announcing that the US government has approved for us filing licences to start shipping H20s,” Huang told reporters in Beijing.

He noted that half of the world’s AI researchers are in China.

“It’s so innovative and dynamic here in China that it’s really important that American companies are able to compete and serve the market here in China,” he said.

Huang recently met with Trump and other US policymakers, and this week, he is in Beijing to attend a supply chain conference and speak with Chinese officials.

The broadcast showed Huang meeting with Ren Hongbin, the head of the China Council for Promotion of International Trade, which is hosting the China International Supply Chain Expo, which Huang was attending.

Nvidia is an exhibitor.

Nvidia has profited enormously from rapid adoption of AI and last week became the first company to have its market value surpass $4 trillion.

However, the trade rivalry between the US and China has been weighing heavily on the industry.

Washington has been tightening controls on exports of advanced technology to China for years, citing concerns that know-how meant for civilian use could be deployed for military purposes.

The emergence of China’s DeepSeek AI chatbot in January renewed concerns over how China might use the advanced chips to help develop its own AI capabilities.

In January before Trump began his second term in office, the administration of US President Joe Biden launched a new framework for exporting advanced computer chips used to develop artificial intelligence, an attempt to balance national security concerns about the technology with the economic interests of producers and other countries.

The White House announced in April that it would restrict sales of Nvidia’s H20 chips and AMD’s MI308 chips to China.

Nvidia had said the tighter export controls would cost the company an extra $5.5bn, and Huang and other technology leaders have been lobbying Trump to reverse the restrictions.

They have argued that such limits hinder US competition in a leading edge sector in one of the world’s largest markets for technology.

They have also warned that US export controls could end up pushing other countries towards China’s AI technology.

Nvidia’s US-traded shares slipped 0.5 percent in after-hours trading on Monday, but its shares traded in Frankfurt, Germany, jumped 3.2 percent early on Tuesday.