US Eases Nvidia AI Chip Export Controls to China, Mitigating Key Downside Risk

What happened

NVIDIA has faced significant headwinds from U.S. export controls, which slashed its China revenue share to about 5% and triggered a $4.5 billion inventory charge, underscoring the franchise's vulnerability to policy shocks. The Trump administration is now moving to reopen NVIDIA's AI chip sales to China, with the Commerce Department issuing revised criteria that could ease restrictions on high-end GPUs like the H200. This aligns with recent market sentiment shifts that frame China as a volatile but potential upside driver rather than a structural loss, as highlighted in the DeepValue report. While this development reduces the immediate risk of further export-related write-downs and may support incremental revenue, it does not address NVIDIA's elevated valuation or competitive threats from ASICs and AMD. Investors should see this as a positive but incremental step that slightly improves the risk profile without altering the core need for cautious positioning.

Implication

This policy shift reduces the likelihood of another large inventory charge, potentially stabilizing gross margins and easing working-capital pressures from China sales. It may allow NVIDIA to recover some lost revenue from China, though contributions are expected to remain capped and subject to political volatility. However, the stock's $4.5 trillion market cap still embeds assumptions of sustained high growth and margins, which remain challenged by hyperscaler capex cycles and ASIC competition. Competitive threats from AMD's MI400 series and hyperscaler in-house chips like AWS Trainium continue to pose long-term risks to NVIDIA's market share and pricing power. Thus, while the news is favorable, investors should maintain discipline by waiting for a pullback toward $150 or clearer evidence of durable earnings growth before increasing exposure.

Thesis delta

The reduction in export control risk slightly improves the bear case by lowering the probability of policy-driven earnings shocks, such as additional multi-billion-dollar charges. However, the overall investment thesis remains unchanged: NVIDIA's valuation is still stretched, and the WAIT rating persists due to competitive pressures and the need for proof of sustainable high growth.