Imagine waking up to find out the world’s most valuable chip company just got handed a surprise gift wrapped in geopolitics — and the stock barely yawns. That’s exactly what happened this week with Nvidia.
After the close on Monday, a simple social media post changed everything. The green light was finally given for Nvidia to ship its powerful H200 chips to select customers in China. And the best part? The U.S. government is taking a 25% cut on every deal. Call it the ultimate win-win, or at least the closest thing we get in U.S.-China tech relations these days.
Yet when markets opened Tuesday, Nvidia shares were basically flat to slightly red. I couldn’t believe it. This isn’t just another regulatory footnote — this is pure bonus revenue for a company that deliberately baked zero China sales into its guidance. Let that sink in for a second.
The Deal Nobody Saw Coming
For years, Washington has been tightening the screws on advanced chip exports to China. First the H100 was banned. Then the H200 joined the blacklist. Nvidia responded by creating the nerfed H20 — a chip designed specifically to stay inside the export rules. And guess what? Almost nobody in China wanted it.
Fast-forward to now. The H200 — a meaningful step up from the H20 and still riding the Hopper architecture — just became legal again for “approved customers.” That’s not the bleeding-edge Blackwell stuff, sure. But it’s dramatically more powerful than anything Chinese buyers have been able to get their hands on legally for over a year.
“Any sales from this are pure bonus. Remember, guidance assumes zero revenue from China.”
– A perspective echoed loudly on Wall Street this week
Why the Market Yawned (And Why That’s Crazy)
Wall Street’s reaction felt like watching someone get handed a winning lottery ticket and then complain about the tax rate. Yes, the U.S. takes 25%. Yes, these aren’t Blackwell chips. Yes, China might still push domestic alternatives.
But let’s be real — every single dollar that comes from these H200 sales drops almost straight to the bottom line. Nvidia already told investors to expect nothing from the world’s second-largest economy. So anything above zero is gravy. Thick, delicious, margin-rich gravy.
Analysts quickly ran the numbers. One major bank sees this loosening adding anywhere from $25 billion to $30 billion in incremental revenue over time. That translates into roughly 60 to 70 cents per share in extra earnings power. At current multiples, that’s worth $14 to $17 per share — and that’s assuming zero multiple expansion.
Will China Actually Buy Them?
This is the question everyone keeps asking. Some reports claim Beijing wants to freeze out Nvidia entirely to protect domestic champions. I get the politics. Nobody wants their entire AI ecosystem dependent on a company that can be cut off whenever tensions flare.
But here’s the uncomfortable truth for China: compute is king. You can cheer for homegrown chips all you want, but if your developers and enterprises can’t train state-of-the-art models at scale, you fall behind. Fast.
We saw what happened earlier this year when a Chinese lab shocked the world with a breakthrough model running on whatever hardware they could scrape together. The global reaction wasn’t “wow, look at their chips” — it was panic that someone outside the usual suspects could compete. That only happens when you have real compute muscle.
- H200 offers substantially better performance than H20
- Hopper ecosystem is mature, well-understood, and CUDA-rich
- Chinese cloud giants still need to serve paying customers today
- Domestic alternatives remain generations behind
Put yourself in the shoes of a Chinese tech CEO. Your competitors are racing ahead. Your engineers are begging for better tools. Do you really tell them to wait five more years for a theoretical domestic solution — or do you quietly buy whatever you’re now allowed to buy?
Exactly.
Valuation: As Cheap As Nvidia Has Been in a Decade
Let’s talk numbers, because this is where things get almost silly.
For fiscal 2027 — calendar 2026 — consensus sits at about $7.62 in earnings per share. At roughly $185, that puts the forward P/E around 24 times. That’s literally the lowest multiple Nvidia has traded at any sustained point over the past ten years.
Now layer on expected growth. Analysts see earnings compounding at 31% annually over the next three years. Do the math and you get a PEG ratio comfortably under 1. For context, the S&P 500 trades around 22 times forward earnings with growth closer to 13-14%. That’s a PEG around 1.6 — meaningfully worse than Nvidia.
| Metric | Nvidia | S&P 500 |
| Forward P/E | ~24x | ~22x |
| 3-Year EPS CAGR | ~31% | ~13.7% |
| PEG Ratio | <1.0 | ~1.6 |
In plain English: you’re paying a tiny premium for more than double the growth. And that’s before any China upside.
What Happens If China Embraces H200?
Scenario one: Chinese buyers snap up H200s as fast as Nvidia can ship them. Earnings estimates move higher. The stock — already cheap — becomes laughably cheap. Multiple expansion becomes almost inevitable.
Scenario two: Beijing plays hardball and adoption is tepid. Fine. Nvidia’s core business outside China remains an absolute juggernaut. Data center demand isn’t slowing down. Blackwell is ramping. Rubin is already on deck for late 2026. Growth stays torrid anyway.
Either way, the stock looks mispriced to the downside.
The Bigger Picture Nobody Wants to Talk About
I’ve been doing this long enough to remember when Nvidia was “just” a gaming chip company trading at 15 times earnings. Then smartphones. Then crypto mining. Then data center AI. Every single time the market declared “this is the peak,” something new showed up.
Today the narrative is “Blackwell delays” and “China risk” and “competition.” Fair concerns. But the demand curve for compute keeps bending upward in a way that’s almost impossible to overstate. Every major tech company — American, European, or otherwise — is in an arms race to build bigger clusters.
And guess who still has an almost comical moat?
“You get shut out of the world if you don’t adopt it.”
That quote applies to countries now, not just companies.
Bottom Line
The H200 China news isn’t some minor footnote. It’s asymmetrical upside for a stock that already screens as one of the best risk/reward setups in the entire market.
If China bites, earnings go up and the stock is dirt cheap. If China drags its feet, earnings still grow like crazy and the stock is merely cheap. There is no realistic scenario where this story suddenly gets worse from here.
Sometimes the market hands you a gift. This feels like one of those times.
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