Earnings Preview | Middle East signs a hundred billion deal, can NVIDIA's $5.5 billion loss be offset by Saudi orders?

According to Zhitong Finance APP, NVIDIA (NVDA.US) will announce its first-quarter earnings report after the market closes on Wednesday, which is expected to be the most anticipated earnings announcement of this reporting season.

This year, NVIDIA's stock price has experienced significant volatility. The company has faced setbacks, from the Trump administration's ban on the export of its H20 chips to China, to concerns related to anticipated semiconductor tariffs. However, the Biden administration's last-minute halt of AI diffusion rules restricting GPU sales to certain countries, along with major investment plans announced during Trump's visit to the Middle East, have pushed NVIDIA's stock price to be roughly flat since the beginning of the year, with a cumulative increase of about 40% over the past 12 months.

Before the earnings report is released, NVIDIA participated in the annual Taipei International Computer Show in Taiwan, showcasing several new technologies, including a new cloud service. This service allows customers to use cloud versions of NVIDIA GPUs through third-party providers such as CoreWeave (CRWV.US) and Foxconn.

According to Bloomberg analyst consensus data, NVIDIA's adjusted earnings per share (EPS) for this quarter are expected to be $0.88, with revenue of $43.3 billion. In the same quarter last year, the company reported an adjusted EPS of $0.61 and revenue of $26 billion.

Analysts expect NVIDIA's revenue in China to reach $6.2 billion, a 150% increase from $2.4 billion in sales in the same region in the first quarter of last year. The U.S. market is expected to contribute $21.6 billion in sales.

However, NVIDIA has stated that it will incur a $5.5 billion charge due to the Trump administration's ban on the sale of its H20 chips. The company announced this in its regulatory filing in April.

NVIDIA specifically designed the H20 chip to comply with the Biden administration's restrictions on exporting AI chips to China. However, when DeepSeek demonstrated its ability to produce powerful AI models using non-top-tier NVIDIA chips, this news sent shockwaves through Washington and Wall Street. As a result, Trump imposed stricter restrictions on the company's chips, prohibiting the sale of H20 chips in China.

According to informed sources, NVIDIA is currently developing an improved version of the H20 chip that meets the performance requirements of the Trump administration.

Bloomberg reported that at a press conference during the Taipei International Computer Show, NVIDIA CEO Jensen Huang fiercely criticized U.S. policies, stating that these policies have failed and instead benefited local AI chip manufacturers in China.

When the Trump administration canceled the Biden administration's planned AI diffusion rules, NVIDIA gained some relief from certain export restrictions. The rules were originally intended to establish a tiered system to determine which countries could purchase AI chips, which would require special permits, or which would be completely barred from access. The government plans to introduce a new set of export requirements in the future.

This move paved the way for NVIDIA to announce that it will provide hundreds of thousands of GPUs to the AI startup Humain, supported by the Saudi sovereign wealth fund, over the next five years. This news was released during Trump's Middle East trip, along with the announcement of a second "Stargate" project to be built in the UAE using NVIDIA's Blackwell system.

Bernstein analyst Stacy Rasgon wrote in an investor report: "For those investors concerned about the sustainability of AI capital expenditures, we now have a well-capitalized, willing, and capable client ready to invest heavily in clear strategic advancements, as Saudi Arabia seeks to position itself as a regional and global AI hub." ”