Nvidia’s stock is rising as confidence builds around this key number

Nvidia's stock is gaining amid growing investor confidence in its China H20 chip business, driven by a new 300,000 unit order for the specialized AI chips to meet strong Chinese demand. While U.S. export licenses are still pending, analysts suggest that resumed H20 sales could be crucial for Nvidia to achieve $7 EPS next fiscal year, significantly above current consensus. This potential revenue stream is seen as vital for investor confidence in Nvidia's financial trajectory, as Chinese customers continue to prefer Nvidia's ecosystem despite the H20 being a reduced-power version.

Analysis

Nvidia's stock is experiencing upward momentum driven by increasing investor confidence in its China-focused H20 chip business. This optimism is substantiated by a recent Reuters report that Nvidia ordered an additional 300,000 H20 chipsets from TSMC to supplement an existing inventory of 600,000 to 700,000 units, a move necessitated by strong demand from Chinese customers. Analysts at Mizuho suggest that while meaningful revenue from these sales may not materialize for at least another quarter, the development is critical for building a pathway toward an earnings per share of $7 next fiscal year, which is significantly above the current FactSet consensus of $5.86. The core of this demand stems from the continued preference for Nvidia's CUDA ecosystem and superior cluster performance over domestic alternatives in China, despite the H20 being a lower-power chip primarily suited for inference. However, a significant contingency remains, as the U.S. Commerce Department has not yet formally approved the required export licenses, creating uncertainty around the timing and ultimate scale of this revenue stream. Jefferies analysts estimate total Chinese demand could reach 1.8 million chips, underscoring the substantial financial opportunity at stake if regulatory hurdles are cleared.

Key Decisions for Investors

• Investors should assess the potential for an upward revision to next fiscal year's earnings estimates, as resumed H20 sales in China could be the key catalyst for Nvidia to surpass the current $5.86 consensus and approach the $7 EPS level targeted by the buy-side.
• Closely monitor official announcements from the U.S. Commerce Department, as the approval and timing of export licenses for the H20 chip is the single most critical variable determining if and when this revenue can be realized.
• Consider the strategic value of Nvidia maintaining its market presence in China, as the persistent demand for its platform, even for compliant chips, reinforces its competitive moat and the lock-in effect of its CUDA software ecosystem against emerging local competitors.