Nvidia Secures China Chip Sales Approval, Yet Valuation and Geopolitical Risks Loom Large

What happened

Nvidia has reportedly gained Chinese government approval for companies like Alibaba to purchase its chips, potentially reopening a market previously constrained by U.S. export controls. The DeepValue report highlights that China has been a persistent headwind, with Nvidia taking a $4.5 billion charge on H20 inventory and explicitly excluding China data center compute from current guidance. This development suggests a marginal near-term revenue upside, but it comes against a backdrop of extreme valuation at ~44x P/E and crowded investor positioning that embeds perfection. Market sentiment already treats geopolitical risk as a background condition, with the report noting that any China-related gains are unlikely to offset broader concerns like AI capex normalization or competitive erosion. Investors should remain critical, as this news does little to alter the fundamental risk-reward asymmetry, where downside to ~$120 is more probable than sustained bull-case growth.

Implication

For investors, the China sales approval could add incremental data center revenue, yet it remains a small fraction of Nvidia's ~$500 billion order book and is prone to swift regulatory reversal. The stock's ~$178 price already discounts hyper-growth, so any upside from China is likely priced in, while downside risks from hyperscaler capex cuts or margin compression persist. Geopolitically, this move underscores the volatile nature of export controls, which could lead to future charges if tensions escalate, as seen with past H20 write-offs. Given the DeepValue report's WAIT rating and attractive entry at $150, investors should avoid chasing this news and instead monitor for evidence of durable earnings power or a valuation reset. Ultimately, maintaining discipline by trimming above $220 or waiting for a pullback offers better risk-adjusted returns than reacting to transient geopolitical developments.

Thesis delta

The news does not shift the core investment thesis, which already incorporates China as a managed risk with limited near-term impact. It slightly improves short-term revenue visibility but reinforces the need for vigilance on export controls and does not alter the high valuation or crowded positioning that underpins the WAIT recommendation. Investors should view this as a minor positive that does not justify changing exposure without clearer signs of sustainable margin defense or order book conversion beyond current expectations.