Chipmaker Nvidia achieved record sales in the second quarter, exceeding Wall Street’s predictions for artificial intelligence chips. Nonetheless, the company’s stock dropped by 2.3% after hours, as investors appeared unfazed by concerns surrounding the AI bubble and the effects of Donald Trump’s trade tensions.

Nvidia’s financial results mark the first assessment of investor sentiment since the recent mass selloff of AI stocks, which saw many tech shares decline amid skepticism regarding the valuation of AI-driven firms.

On Wednesday, NVIDIA announced adjusted earnings per share of $1.08 with total revenues reaching $467.4 billion. According to FactSet data, this surpassed Wall Street’s earnings per share expectations.

However, investor expectations were notably high. The market’s reaction may be influenced by slight misses in other segments of the company’s performance, particularly in data center revenues, where Nvidia recorded $41.1 billion, falling short of optimistic forecasts.

“We can’t overlook Nvidia this time, especially as they strive for record-breaking highs.” Investing.com. “To claim that stock prices are optimally priced would be a considerable understatement, as we actually needed another significant exceedance.”

The company further indicated that it had not factored the shipping of the H20 chip to China into its forecasts.

This aspect is central to concerns regarding the US-China trade conflict. Earlier in the year, Trump imposed a ban on AI chip sales to China, resulting in a $4.5 billion hit to Nvidia’s finances during the first quarter. In August, Nvidia consented to provide the US government a 15% reduction in H20 chip prices for exports to China in exchange for export licenses. China has voiced security concerns over chips and is amplifying its own domestic production efforts.

Colette Kress, Nvidia’s Chief Financial Officer, noted during a revenue call that some companies are interested in acquiring H20, with the first group of companies already receiving licenses to purchase chips. Kress mentioned that Nvidia could potentially ship between $2 billion and $5 billion worth of H20 chips to China, contingent on “geopolitical circumstances.”

Huang has consistently highlighted the importance of operating in the Chinese market. “We are in discussions with the administration about the necessity of addressing the Chinese market for American firms,” Huang stated. He added that, aside from the fact that H20 has been cleared for sale in China by unlicensed companies, there might be opportunities for the company to introduce a version of Blackwell in that market.

“China is the world’s second-largest computing market and hosts a substantial number of AI researchers. Approximately 50% of the world’s AI researchers are based in China,” Huang stated. “Most of the leading open-source models are developed there, making it crucial for American tech companies to engage with that market.”

“We eagerly anticipate future developments,” remarked Monteiro, an analyst from Investing.com. “The fact remains that without the essential sales boost from H20 in China, Nvidia cannot sustain the growth trajectory that driven that valuation.”

The company projects revenues of $54 billion for the third quarter, aligning with Wall Street’s expectations, and mentions that its board has authorized an additional $600 billion in share buybacks.

Founder and CEO Jensen Huang remarked that production of the company’s latest AI superchip, Blackwell, is “gaining momentum and demand is remarkable.”

“The race in AI has commenced, and Blackwell will serve as the essential platform,” Huang stated in a press release.

Despite the initial tepid market reaction to the company’s financials, some analysts remain optimistic about the ongoing AI revolution, especially as major tech firms like Meta, Microsoft, Amazon, and Alphabet heavily invest in AI infrastructure. “This is a critical analysis of Nvidia and the AI revolution,” noted Dan Ives, an analyst at Wedbush Securities.

“This represents a significant indicator for the broader tech world, suggesting that despite prevailing challenges from China, the AI revolution is positioning for the next phase of growth. One chip is pivotal to triggering this AI revolution, and that is Nvidia.”