TLDR
- Nvidia (NVDA) stock jumped 2% Monday to close at $144.69, just 3% below its all-time high following CEO Jensen Huang’s European tour
- The company faces an $8 billion revenue hit this quarter from Trump administration’s China chip ban, eliminating the entire Chinese market from forecasts
- ‘Sovereign AI’ represents a $1.5 trillion market opportunity, with Europe accounting for roughly $120 billion as countries build their own AI infrastructure
- Nvidia plans to invest half a trillion dollars in electronics procurement over four years, with several hundred billion potentially manufactured in the U.S.
- Export restrictions already cost Nvidia $2.5 billion in Q1 sales, with China previously representing over 10% of total company revenue
Nvidia stock climbed 2% Monday, closing at $144.69 as investors weighed the chip giant’s European momentum against growing trade war headwinds. The stock now sits just 3% below its record closing high.
The rally followed CEO Jensen Huang’s recent European tour. He attended events in Paris including the GTC conference and Viva Technology summit.
European leaders embraced Huang’s vision of ‘sovereign AI’ during his visit. This concept involves countries building their own AI infrastructure rather than relying on foreign systems.
The sovereign AI market represents a massive opportunity for Nvidia. Oppenheimer analyst Rick Schafer estimates the total addressable market at $1.5 trillion globally.
Europe’s share of this market could reach $120 billion according to Schafer’s calculations. Multi-gigawatt data centers are expected by 2028 across the continent.
A single gigawatt data center translates to up to $50 billion in potential revenue for Nvidia. The analyst maintained his Outperform rating with a $175 price target.
Schafer highlighted Nvidia’s advantages in the AI space. The company offers full-stack hardware and software solutions with unique rack-scale capabilities.
China Ban Creates Revenue Headwinds
The Trump administration’s trade restrictions have created major challenges for Nvidia. The company faces export bans on its chips to China.
China previously represented over 10% of Nvidia’s total sales. The company sold $4.6 billion worth of H20 chips alone in the quarter before restrictions took effect.
Export limits cost Nvidia $2.5 billion in potential Q1 sales. Management estimates another $8 billion hit for the current quarter.
The company has now eliminated China entirely from its sales forecasts. This suggests management expects minimal revenue from the Chinese market going forward.
Restrictions on open-source Chinese AI models like DeepSeek and Qwen could reduce GPU demand. This creates both near-term and long-term challenges for Nvidia’s business.
The trade war has also complicated manufacturing supply chains. Producing GPUs overseas could face heavy tariffs or outright bans at any time.
Manufacturing Shift to U.S. Planned
Nvidia plans to redirect significant manufacturing to the United States. CEO Jensen Huang outlined ambitious procurement plans during recent comments.
The company expects to procure half a trillion dollars worth of electronics over four years. Several hundred billion dollars of this production could occur in the U.S.
Moving manufacturing stateside typically increases costs compared to overseas production. The trade war could also complicate securing rare-earth minerals from China.
These manufacturing moves aim to insulate Nvidia from future trade escalations. However, the plans remain fluid and could change based on political developments.
Nvidia previously struck deals during President Trump’s Middle East visit. Saudi Arabia and the United Arab Emirates will receive thousands of Nvidia AI chips through these agreements.
The company reported strong Q1 earnings in May despite the China headwinds. Revenue beat expectations thanks to sales of new Blackwell chips and server equipment.
Nvidia’s stock has staged a furious comeback over the past two months. The shares have recovered from earlier lows as AI demand remains strong outside China.
