Nvidia's $35B China Chip Orders: What It Means for NVDA Stock

Nvidia has reportedly received orders for over 3 million Blackwell chips from Chinese companies including ByteDance, Alibaba, and Tencent, worth approximately $35 billion, according to Reuters citing anonymous sources. This comes after months of regulatory uncertainty that had essentially frozen Nvidia's data center chip sales to China.

The U.S. government imposed export restrictions on advanced chips to China in 2025, requiring Nvidia to obtain licenses for such sales. Nvidia CEO Jensen Huang lobbied Washington and eventually struck a deal to cede 15% of Chinese chip sales to the government. However, due to reservations from both U.S. and Chinese regulators, sales have barely resumed.

On the latest earnings call, Nvidia CFO Colette Kress said less than 1% of data center revenue came from China, and those were older Hopper chips, which are dilutive to gross margins. The new Blackwell orders, if fulfilled, would be more profitable and represent a significant revenue opportunity.

However, sources told Reuters that Nvidia may only be able to fill 5% to 10% of these orders because it hadn't planned for such high production levels. The company reportedly has capacity to produce at most 3 million Blackwell chips globally in 2027, which is roughly equal to the total Chinese order volume.

The $35 billion order is significant because Nvidia's forward guidance has not included any potential China sales. On the last earnings call, Kress projected around $108 billion in revenue for the third quarter of fiscal 2027. So $35 billion represents a substantial potential upside if orders can be fulfilled.

Moreover, selling Blackwell chips to China would be accretive to gross margins, unlike the older Hopper chips that Nvidia has been selling there. This could boost profitability beyond current expectations.

However, the production constraint is a major caveat. If Nvidia can only fill 5-10% of orders, the immediate revenue impact would be limited to $1.75-$3.5 billion. That's still meaningful but far from the full $35 billion.

The news also signals that demand for AI chips remains strong, even in China despite regulatory hurdles. This could help alleviate investor fears about a potential slowdown in AI spending, which has been a concern weighing on Nvidia's stock recently.

Despite the positive news, Nvidia's stock only traded marginally higher, indicating that investors may be skeptical or that the news was already partially priced in. The stock has fallen over 9% in the past couple of weeks amid broader AI concerns.