Nvidia’s loss in China is also a bargaining chip

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Not even a trade war can stop Nvidia (NVDA).

In another impressive showing, the apex AI ticker charged through the tech sector malaise and delivered. But the quarterly beat also came with a warning: The company will miss out on $8 billion worth of H20 chip sales in its second quarter, due to tightened export controls.

At first glance, the missing revenue highlights the risks of doing business with the nation’s economic adversary — this time from the demand side, not the supply side, like Amazon and Apple. Trump is building on a policy from the Biden years to limit China’s ability to source American technology. And so Nvidia has to forfeit billions of potential sales.

But the misfortune of being locked in the middle of geopolitical tensions can work in your favor.

As Beijing and Washington talk their way through the next phase of their tariff truce, Nvidia’s disadvantage could swiftly turn into an edge. The chip ban can be wielded as a bargaining chip in the broader China trade war.

“The ongoing US/China negotiations could yield positive results for Nvidia over the coming months that could get Nvidia back in the China H20 game (with a new restricted chip) and ultimately the $8 billion run rate could easily come back to the Nvidia story,” said Wedbush analyst Dan Ives in a note on Thursday. After all, China still wants chips.

CEO Jensen Huang is saying all the right things too.

He touted the company’s plans to manufacture its AI chips in the US, while framing the export controls as a policy failure. Instead of holding China back, Huang said it will hamstring Nvidia by keeping it out of a huge AI market and stymie American national security interests.

Jensen knows that his company is caught in the China tariff storm, but there’s a possibility he can artfully slip out of it.

Nvidia punctuates a Magnificent Seven earnings season that largely surpassed expectations. Their tickers, however, tell a more nuanced story, with the majority in the red for the year, entangled in the back-and-forth of trade policies.

Narratives of transformative AI development and growth haven’t gone unscathed. But they persist. And while there are real, costly risks from being pushed and pulled as a part of global trade deals, there’s a clear path for Nvidia’s problems to simply disappear.