To The Moon

All eyes will be glued to $NVIDIA(NVDA)$ as the world’s #1 chip maker hands up its Q2 2025 earnings report card.

Q2 Earnings Estimates.

Market estimates are:

• Earnings per share (adjusted) : will come in at $1.01 vs Q2 2024’s $0.68; that’s a +48% YoY gain. (see below)

• Revenue : will come in around $46.0–$46.2 billion vs Q2 2024’s $30 billion; that’s a +53% YoY growth. (see below)

Nvidia is expected to see continued explosive growth on the back of surging AI and data center demand, even as the rate of growth may slightly moderate compared to the historic leap in 2023–2024.

Upside Bummer.

If there is anything “negative” to come out of Nvidia’s impending earnings report card would be its payout (on revenue earned on H20 chip sales in China) to US government.

• Starting August 2025, Nvidia must pay 15% of its China AI chip sales revenue directly to the US government as part of a deal to maintain access to Chinese export licenses.

• This policy follows the reversal of an outright ban and is expected to cost Nvidia up to $8 billion in annualized revenue impact (the direct Q2 2025 hit will be a portion of this, depending on the China sales mix).

Shareholders’ Impact.

The above is a bizarre arrangement, unheard of and definitely unprecedented. With 15% upfront deduction, shareholders will definitely be impacted.

• Revenue: Nvidia’s top-line revenue from China will now be net of 15% payout, directly reducing total reported sales from those chips going forward.

• Earnings: Net income and EPS will be proportionally reduced; about 15% of qualifying China AI chip sales will not flow to the bottom line or shareholders.

• Profit Margins: Overall gross margin could see a modest reduction, and EPS growth could slow slightly in future quarters depending on the size of China’s contribution to overall AI chip sales.

CEO’s Possible Address.

Never to shy away from the public and the media, NVDA’s CEO Jensen Huang will likely address the elephant in the room, head on.

• Expected to focus on the strategic rationale: Emphasis will centre on “retaining access” to China’s massive market, and that the 15% payout is “well worth it” given the alternative would be more damaging (eg. outright sales ban).

• Emphasize Nvidia’s global leadership beyond China, strong AI/data center demand in the US and globally, and resilience of AI chip growth across regions.

• Direct commentary that 15% payout as a cost of business, noting it will be absorbed for the sake of long-term growth, and that Nvidia will work to preserve margins and shareholder value despite the new policy.

To further disperse focus on the 15% bummer, Huang - the story teller will probably:

• Preview how the company is managing the policy.

• Reassure on robust guidance.

• Seek to pivot the focus to new (a) product launches, (b) innovation cycles, and (c) global supply/demand tailwinds in data center and AI infrastructure.

The only uncertain is whether he will touch on NVDA’s quantum computing progress to further divert attention away from the US government bribes, that $Advanced Micro Devices(AMD)$ is also expected to “contribute” to the government’s coffer.

If there is anything that would potentially dampen NVDA’s Q3 2025 guidance / outlook would be Chinese government’s “warning” to domestic Chinese tech companies. (see above)

China’s Jam Brake.

China has warned domestic tech firms to avoid purchasing or using NVDA's H20 AI chips, citing national security concerns, including alleged risks of remote tracking or "backdoors".

Alleged claims that NVDA has categorically denied.

While the guidance specifically encourages state and sensitive sectors to minimize use, it is seen as both a reaction to US rhetoric and an effort to buy time for China's domestic alternatives like Huawei.

Nevertheless, there is no outright ban yet, and many Chinese companies still rely heavily on Nvidia hardware for advanced AI development.

However, the rate of growth will definitely be dampened because everyone is expected to toll the party’s line in a planned economy, lest we have forgotten.

Will US market ignore Q3 2025 potential shortfall and celebrate, pushing NVDA to $200 and beyond before going in for the kill and suddenly exit ? That’s my bigger fear.

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