Jensen Huang Delivers a China Blow to Nvidia Shareholders. The Next Quarter May Ease the Pain.

Not much has gone wrong for Nvidia (NASDAQ: NVDA) over the past three years. The company's shares have soared thanks to its dominance in the market for artificial intelligence (AI) chips. However, there have been some headwinds for the tech leader. Last year, the U.S. government restricted exports of some of Nvidia's products to China, with the Chinese government also going after the company.

These issues have taken a toll on Nvidia's operations in China, as CEO Jensen Huang recently noted. Let's see what he said and what it means for investors.

Image source: The Motley Fool.

Hitting rock bottom in China

With Nvidia's operations in China facing obstacles, local chipmakers -- who might not have been able to compete as well with the global market leader without these regulatory setbacks -- took advantage. Huawei has taken the lead in the country, with other companies, such as Alibaba and Baidu (through subsidiaries), also being notable players in the field. Where does Nvidia now rank in all this? According to Huang, it isn't even on the map. Here's what he recently said in an interview regarding Nvidia's market share in the country: "Today, in China, we have now dropped to zero."

This is especially striking since the company once held more than a 90% market share in the country. Nvidia does not expect any revenue from China in the first quarter of its fiscal year 2027, which ended on April 2026 and whose results are due on May 20.

What it means for investors

Nvidia has performed well over the past 12 months despite the issues it has faced in China. The stock has climbed 74% over the trailing-12-month period. Here's one key reason why: The market for AI chips in the U.S. is much larger than the Chinese one. Consider that last year, Alibaba, one of China's largest cloud players, said it would spend about $52 billion in capex over the next three years, largely to support its AI-related ambitions.

Major hyperscalers in the U.S. are easily eclipsing that. For instance, Microsoft said it would spend $190 billion in capex during the calendar year 2026 alone. Nvidia's financial results also speak for themselves. During the company's fiscal year 2026, ending on Jan. 25, revenue soared 65% year over year to $215.9 billion. The company's earnings per share came in at $4.90, 67% higher than the year-ago period.

There is more where that came from. Nvidia projected $78 billion in revenue (at the midpoint) for its upcoming first quarter, even without revenue from China. That would represent a year-over-year increase of almost 77%. And at the pace at which tech giants are spending, and the fact that the company continues to innovate, Nvidia looks likely to maintain a torrid pace for a while.

So, even though it isn't great news that Nvidia's business in China has crawled to a halt, the chipmaker can continue performing well for a long time even without strong operations in the country.

Prosper Junior Bakiny has positions in Nvidia. The Motley Fool has positions in and recommends Baidu, Microsoft, and Nvidia. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.