Nvidia's China opening could unlock surprise earnings upside

Nvidia 's ( NVDA ) first H200 shipments to China are unlikely to change its quarterly results. The reported volume is just too low.

But it matters to U.S. investors, since Nvidia's current guidance assumes data-center compute revenue from China will be zero.

For the first quarter of fiscal 2027, Nvidia's earnings report projects second-quarter sales of roughly $91 billion, plus or minus 2%.

Management's choice to exclude China as a sales channel means the H200 sales channel is repeatable and might ultimately contribute revenue over the disclosed expectation. It also might expose shareholders to a familiar threat.

Previously, a surprise U.S. export ban on Nvidia's H20 chip had led to the business booking a multibillion dollar inventory charge, CNBC reported. As a result, China policy can create earnings upside, but it can also erase profit with extraordinary rapidity.

This means the first shipments of H200 will not only be a geopolitical development. They are also an early test of whether Nvidia can turn a market it currently values at zero into an incremental source of sales, TechCrunch noted. The company must do this without losing its profits, interrupting supply for American customers, or creating another inventory problem.

The shipments won't answer that question immediately. They do, however, bring China back into the earnings equation for U.S. stockholders.

"Our effective foreclosure from the China market helped our competitors build larger developer and customer ecosystems to challenge us worldwide," Nvidia said in a regulatory filing .

Revenue of $81.6 billion in the first quarter was up 85% from a year ago . In its most recent quarterly report to the Securities and Exchange Commission, Nvidia reported that data-center revenue rose 92% to $75.2 billion.

Its gross margin came in at 75% on a non-GAAP basis, demonstrating the profitability of the AI infrastructure boom.

Those results make the H200 development more of an optionality narrative than a rescue story.

Nvidia has already demonstrated that demand from U.S. cloud providers, sovereign AI projects, enterprises, and specialized AI companies can drive substantial growth without Chinese data-center compute sales.

On top of the existing momentum, a working H200 license path may be an additional demand source, Reuters confirmed.

The extent of the potential is still uncertain. Nvidia characterized the first shipments as "very few" and has not set a China revenue goal for the initiative. But the company offers a clear starting point for investors by assuming no China data-center compute revenue.

Small cargoes will be of little use. A recurrent sales channel may not necessarily be as rosy as it seems, if that is the case.

History explains why investors need to look beyond anticipated revenue.

In April 2025, the U.S. government said exports of its China-focused H20 processor will require a license, South China Morning Post indicated. The company later wrote down $4.5 billion for excess inventories and purchasing obligations.