Nvidia has achieved a significant milestone, with its market capitalisation soaring to $5.52 trillion, surpassing silver to become the second-largest asset globally. This surge follows the U.S. government's recent approval for the sale of H200 chips to China, which has boosted investor confidence and led to a positive response in the stock market.
The approval includes about 10 major Chinese companies, such as Alibaba, Tencent, ByteDance, and JD.com. It allows for a partial resumption of high-tier AI chip sales that had been largely restricted since export controls were implemented in October 2023. Nvidia's stock reached an all-time high of $236.46 following the announcement, reflecting optimism about a potential recovery in Chinese demand for AI hardware. Before the restrictions, China accounted for nearly a quarter of Nvidia's total revenue, which dropped to almost zero afterward.
The implications of this policy change go beyond immediate sales figures. With the Chinese market estimated at around $8 billion annually, the reopening could significantly strengthen Nvidia's data center business. However, there is a waiting period before any revenue can be recognised, as physical shipments still await Chinese regulatory reviews. The timing of these approvals will ultimately determine when Nvidia can start realising sales from its renewed access to the Chinese market.
As Nvidia's valuation climbs, it now exceeds the gross domestic product of all countries except for the United States and China. This rapid increase raises questions about the broader impact on the tech sector, particularly as expectations of improved U.S.-China relations add complexity to future market dynamics. Nvidia's Chief Executive Jensen Huang has underscored the importance of diplomatic engagements, referring to U.S. President Trump's summit with China's leader as "one of the most important things in human history."
The focus now shifts to the timeline for the first shipments of H200 chips. While the regulatory easing from Washington is a positive step, actual supply depends on the pace of Chinese governmental reviews. The outcome of this process will be critical in determining when Nvidia can fully leverage its position in the Chinese market and whether demand for AI hardware will continue to drive valuations for technology stocks moving forward.
Investors and analysts are closely monitoring these developments, as a revival of Chinese demand could act as a catalyst for Nvidia's ongoing growth trajectory in the data center sector. The next few months will be pivotal in shaping expectations and strategies within the AI chip market as the industry adapts to shifting geopolitical landscapes.
