Markets brace for impact of China sales, US deal ahead of Nvidia's earnings

Investors will focus on Nvidia’s China business when the artificial intelligence chipmaker reveals its earnings report on Wednesday, after a trade deal with and fresh pushback from Beijing introduced new uncertainty around a key market.

The company is positioned in the middle of the US-China trade wars, and its prospects in China now depend on how both sides handle tariffs and rules on advanced semiconductors. 

Nvidia recently agreed that it would pay the US government a chunk (15%) of the sales it books in China in return for licenses of exports, a step that drew criticism from both parties in Congress. 

At the same time, Chinese authorities, despite strong demand for Nvidia’s chips, have urged domestic firms to reduce purchases on security grounds. 

Reports have also said Nvidia told suppliers to pause China-focused H20 chips production. Cryptopolitan previously reported that Nvidia will develop a new chip for China that is more powerful and will address the shifting rules.

China brought 13% of Nvidia’s revenue last year

For Q2 2025, many analysts did not include H20 sales revenue in China because US approval arrived quite late, and China’s pushback has made full-year forecasts harder to pin down. 

NVDA shares rose by over a third in 2025. That is a small gain compared with the previous two years, but it still outpaces the over 15% advance in the chip index and the S&P 500 Index’s near 10% rise this year.

In Q3, Wall Street expects that Nvidia will guide a $52.96 billion revenue, 51% higher from a year earlier. Analysts at Piper Sandler have estimated that up to $6 billion of the revenue would be brought in from China, with further growth at a 12% to 15% rate. 

Margins, however, may be lower. Chips bound for China may carry a 5-15 percentage-point reduction to total margins under the federal arrangement, and Bernstein estimates that would shave about one point from Nvidia’s overall margins. 

It is also expected that the company’s adjusted total margin may drop by 4 percentage points and reach 72.1%.

Options traders are preparing for a large reaction

Pricing implies about a $260 billion swing in Nvidia’s market value after the second-quarter report, with options pointing to a roughly 6% move in either direction. It is lower than 7% long-term average move, suggesting investors may feel they have a better handle on likely outcomes as the company matures. 

Over the last 12 quarters, Nvidia’s overall earnings averaged 7.7%, whereas on average, the actual move remained close to 7.6%. After a big rally that lifted markets in 2025, the tech sector has pulled back this month as enthusiasm cooled. 

Traders now look at Nvidia’s update to judge whether its roughly $4 trillion valuation can be justified, and to see how the recent deal with the United States will affect the outlook.

NVDA shares are up approximately 34% in 2025 and edged up 1.02% to reach $179.81 on Monday. At the same time, the S&P 500 reduced by 0.43% and reached 6,439.32 on the same day, edging up 9.5%.

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