Nvidia’s Earnings, Its Defensive Moats, and the Urgency of Returning to China
Ben Thompson explores how Nvidia’s latest earnings are still fundamentally tied to supply constraints and how its success now hinges more than ever on reasoning models and returning to the Chinese market.
The Power of Nvidia’s Moats
Nvidia’s leadership rests on solid pillars: its CUDA ecosystem, unmatched AI GPU market share, and the scalable Blackwell architecture, all of which give it dominant pricing power and operational strength.
But while these technological and ecosystem advantages remain powerful, they may not be enough to counter the strategic necessity of regaining access to China’s massive market.
China: A $50 Billion Opportunity at Risk
China still represents an enormous opportunity, estimated at up to $50 billion annually. Despite agreements permitting exports of its H20 chip under a 15% revenue-sharing arrangement with the U.S., recent signals from Beijing have cooled the resumption of those sales, presenting a major drag on future growth.
Earnings Recap & Market Response
Nvidia delivered a striking 56% year-over-year jump in Q2 revenue, reaching about $46.7 billion, and reported robust net income, yet shares slipped 2–3% in after-hours trading.
The dip reflects investor concern over slowing growth and geopolitical constraints, particularly around access to China.
On the plus side, the company’s gross margins remain strong, and forward guidance, including a projected $54 billion in Q3 revenue, bolsters analyst confidence. Firms like Morgan Stanley and UBS have raised outlooks, even as others remain cautious due to the unresolved China situation.
Why Nvidia Must Return to China
Thompson reminds us that despite all its technical prowess and ecosystem strength, Nvidia’s long-term sustainability is tied to reopening Chinese markets. Without it, they’re leaving a massive portion of potential growth on the table, a looming challenge that cannot be ignored.