Nvidia and the China factor: more sales expected but Taiwan risk

Against this backdrop, it seems clear that Nvidia is pawing its way back to the chip table in China. Will this will allow the group to put the clock back to before the tariffs battle began? Experts believe not. Antoine Chkaiban, an analyst at New Street Research, pointed out that 'China has historically accounted for 20-25 per cent of Nvidia's data centre business'. After Donald Trump's 'Niet' on H20 the share has effectively dropped to zero. "Now the prediction is that the share can recover, reaching 10-15%. And that is in the long run'. "In fact," echoes Giacomo Calef, Country Manager of NS Partners, "we must not forget that local groups, such as Huawei, are developing their own high-tech solutions. This competition will inevitably not allow Nvidia to return to the market share it had only a year ago'. Moreover, continues Calef, 'I think the benefit will be mainly in the short term. In the longer term, I don't see such a big business upgrade in the former Middle Kingdom'.

Yes, the former Middle Kingdom. The latter, still on the processor front, is an important variable in another respect: Taiwan. The group, it should be remembered, is 'fabless'. That is, it relies on third parties to manufacture its processors. Among these is Tsmc . As is well known, the company - notwithstanding the push for geographical diversification (new plants, for example, in the USA) - is essentially active in Formosa. That is: the island at the centre of the bitter dispute between the US and China. In such a context, there is a risk that problems may arise on the supply chain front. In 2024-2025, according to Bloomberg terminal, 15.7% of Nvidia's revenues were generated in Taiwan. True, the group has reduced its dependence on production located on the island. In 2016, for instance, this amounted to 36.8% of the total. Moreover, Tsmc is still a supplier to many other large technology companies. Thus, the sword of Damocles hangs somewhat over the entire industry. Having said that, however, the underlying problem also remains for the Californian company.

In conclusion, therefore, China is a relevant variable for the business of the queen of chips. An unknown variable that can give (to business) but at the same time take away. This is an ambivalence that the do-it-yourselfer is obliged to take into account.

In the same way, the development of the balance sheet must be considered. In general, turnover and profitability increased. In the last quarter, the company reported revenues of $44.06 billion (+69% year-on-year) and a net profit of $18.77 billion (+27% compared to the same period in the 2024-2025 financial year). In both cases, the numbers - despite the impact of Donald Trump's then-present ban on H20 - beat estimates. The stock gained 3.25 per cent in the wake of the data release. Having said that, however, it is interesting to look at the dynamics - for example, over the last six quarters - of both turnover and industrial margin (gross margin). What does it turn out to be? It turns out that - from quarter to quarter - accounting items have slowed down. In particular, the non-GAAP gross margin, in the first quarter of 2024-2025, was worth 78.9%. Then, in the second and third quarters, the indicator dropped to 75.5% and 75%, respectively. Finally, after having reached 73.5% two quarters ago, it landed at the level of 60.5% in the first three months of 2025-2026. Of course! Without the negative weight of the ban wanted by Washington - and which should now disappear - the Gross Margin would have been 71.3%. And, however, the margin held back. Why, then, has the stock continued to rise? The answer is multifaceted. Firstly, the structural trend on Artificial Intelligence - together with the idea that Nvidia is strategically well positioned - induces investors to buy. When quarterly figures beat estimates - albeit less ambitious quarter by quarter - the opportunity for a 'buy' is there. Especially, if it is the retail crowd that dominates Wall Strett/Nasdaq equities. That is: people -sophisticated in some cases- but generally trend followers. Not only that. Another reason is of a technical nature: when the capitalisation of a company becomes so significant, various equity products (Etf) and the portfolios of institutional investors (benchmark funds) are 'obliged' to buy the securities of the company in question. 'That being said, however,' Calef points out, 'Nvidia trades at high multiples. Indeed, in a normal context the current P/e at 52 times is a 'nonsense'. Consequently, caution must be exercised, since - despite the fact that the group is solid and well managed - the obligation is always to beat consensus estimates'.

In the face of such a scenario, it may be supportive to see what the technical analysis says. 'In this respect,' explains independent analyst Silvio Bona, 'the stock, until recently, was in a sideways phase'. A 'rectangle figure "started" towards the end of June 2024 and "ended" on 2 July'. In this last session, 'Nvidia definitively broke upward the resistance, which had become support, that constituted the "roof" of the rectangle and was located in the $154 area'. The shares are now at all-time highs and, therefore, "it makes little sense to give any indication of potential targets. What is important, given that in any case the resistance was broken with low volumes, is that the stock does not return below the $145-154 area. And, this, to confirm the further bullish approach. Beyond this, it must be remembered that in the current context the so-called 'make or break' situation has materialised. That is, in very simple terms, a decisive moment: either the price, having broken the key level to the upside, continues to rise, or it stops and retraces.

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