Nvidia Reportedly Just Landed $35 Billion In Chip Orders From Chinese Companies. Here's Why That Could Be Great News for the Stock

It has not been an easy couple of weeks for the artificial intelligence giant Nvidia (NASDAQ:NVDA), whose stock has fallen by over 9%.

AI concerns have been front and center, as Anthropic appears to be dragging its feet on its suspected initial public offering, and as investors fret about some of the balance sheets of debt-laden neoclouds.

Nvidia is still having a solid year, but the company has posted incredibly strong results in its first two quarterly reports and arguably hasn't been rewarded as much as some investors would have expected.

Earlier today, Reuters, citing anonymous sources, reported that Chinese companies, including ByteDance, Alibaba, and Tencent, have ordered more than 3 million Nvidia Blackwell chips, collectively worth $35 billion.

Here's why that could be great news for the stock.

Image source: Nvidia.

Chinese sales were not previously factored into the company's guidance

After the Trump administration imposed new tariffs on China in 2025, it told Nvidia in April of that year that it would need to obtain an export license to continue selling data center chips to Chinese companies.

This had also been an issue in former President Joe Biden's administration, with both administrations citing national security concerns.

However, Nvidia's CEO, Jensen Huang, met with Trump on several occasions and also lobbied Washington regulators, eventually striking a deal in which Nvidia would cede 15% of its Chinese chip sales to the government.

Most of those reports came last year, and there hasn't been much of an update since. Still, due to reservations from both U.S. and Chinese regulators, sales have hardly resumed.

Nvidia's CFO Colette Kress said on the company's most recent earnings call at the end of August that less than 1% of Nvidia's data center revenue came from customers in China, and it was for Nvidia's older-generation Hopper 200 chips.

Kress also said that Hopper sales are dilutive to gross margins, so it's positive that the company is able to sell Blackwell chips to Chinese customers.

The even better news for investors is that Nvidia has been providing forward guidance without including potential sales to Chinese companies. On the last quarterly call, Kress said the company is projecting revenue for the third quarter of its fiscal year 2027 to come in around $108 billion, so $35 billion is not an insignificant number.

However, Reuters also reported that Nvidia may not be able to fulfill all Chinese orders because it had not planned for such production levels. One source told Reuters that Nvidia may only be able to fill 5% to 10% of orders and has capacity to produce at most 3 million Blackwell chips globally in 2027.

Good news for AI demand

Investors and analysts will clearly be anxious to learn more about the Chinese orders on the company's next earnings call, including the magnitude of the orders, how much the company can fill, and how much of the sales it must cede to the government.

Despite the news, Nvidia's stock only traded marginally higher as of 2:04 p.m. ET today, and the market was broadly in the green. The stock has had some difficulty gaining traction, despite reporting blowout numbers and guidance each quarter so far this year.

Part of it likely has to do with Nvidia's roughly $5.2 trillion market cap and the fact that it's already guiding for 70% revenue growth in its fiscal year 2028. Investors are also nervous about the AI trade and whether companies can keep buying chips at the same level they have been.

Still, it's hard to view the demand in China as anything but broadly good news for Nvidia and the AI trade on the whole.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.