As Nvidia, the leading player in artificial intelligence (AI) chips, is set to announce its fiscal year 2026 first-quarter results (April to June), market expectations are adjusting downward. Analysis suggests that the semiconductor export restrictions to China from the Trump administration have likely imposed a greater burden on Nvidia’s profitability than the market anticipated. Securities firms continue to highly evaluate Nvidia's long-term competitiveness in the AI chip market, while noting that short-term performance uncertainty may increase until the next quarter (July to September).
According to industry sources on the 28th, global securities firms have recently revised downward their forecasts for Nvidia's key profitability metrics, including the adjusted gross profit margin (the profit margin after subtracting costs from total revenue, adjusted for specific expenses and revenue) and earnings per share (EPS). The average adjusted gross profit margin on Wall Street, tabulated by market research firm LSEG, has fallen more than 11 percentage points from the same period last year to 67.7%. Bank of America predicts this figure could drop to 58%. Wedbush Securities also forecasts that the gross profit margin could decline by more than 12.5% compared to the previous year. EPS has decreased from $0.82 to $0.80 over the past week.
Analysis indicates that the semiconductor export restrictions to China, implemented last month, have significantly impacted Nvidia’s performance. The Trump administration limited the export of Nvidia's AI chip "H20" to China last month to curb Chinese advancements in AI technology. Consequently, H20 exports have been completely halted since the end of last month, and Nvidia estimates the loss associated with this regulation could reach $5.5 billion (approximately 7 trillion won). Analysts on Wall Street believe that as of the end of April, the sales loss alone may have reached about $1 billion (approximately 1.37 trillion won). A Nvidia spokesperson noted on the 25th that "until a new product design approved by the U.S. government is finalized, we are effectively excluded from the massive data center market in China."
The repercussions are also reflected in the market outlook for the next quarter. JPMorgan analysts predict that Nvidia's total sales for this year may decrease by $15 billion to $16 billion (approximately 20.65 trillion to 22 trillion won), warning that the second-quarter guidance to be presented in this performance announcement could diverge from market expectations. Bank of America suggested that "Nvidia's second-quarter revenue guidance may be around $41 billion (approximately 56 trillion won), which is significantly below the Wall Street average expectation of $46 billion (approximately 63 trillion won)," adding that the second-quarter EPS forecast could be about 16% lower than the market average estimate at $0.85.
The rising expenses associated with the initial supply process of Nvidia’s latest AI chip "Blackwell" are also cited as a factor putting pressure on performance. There is an analysis indicating that costs may have temporarily increased to resolve technical issues during the initial mass production stage. Financial Times (FT) reported that "issues such as overheating and cooling system leaks occurred in the GB200 racks equipped with next-generation AI chipsets based on the Blackwell architecture, and while suppliers are addressing these issues to accelerate production, this process has not gone smoothly."
However, there are still high expectations in the market regarding Nvidia's long-term competitiveness driven by strong AI demand. Although market forecasts have slightly decreased, the prevailing view is that year-over-year performance growth will continue. Morgan Stanley named Nvidia as the top pick in the semiconductor sector, stating that "despite short-term concerns regarding sales in China, the path toward re-acceleration in the second half of the year is clear." Therefore, what the market is focusing on now is the specific business outlook Nvidia presents. Wedbush Securities noted, "The most important aspect going forward is whether Nvidia can sufficiently offset the sales losses from the halt of H20 exports in other markets." It has been reported that Nvidia plans to launch a new AI chip in the Chinese market that offers lower performance and price compared to the restricted H20 model, suggesting that concrete plans regarding this should be presented.