TLDR
- Nvidia shares declined 2.8% to $176.66 in premarket trading Friday as broader markets fell on regional bank concerns
- China revenue dropped from 21% to 12% of global sales after Beijing discouraged use of Nvidia AI chips
- Current quarter shows zero forecasted China revenue, representing $2-5 billion in lost potential sales
- November 19 earnings expected to show $54 billion revenue with 54% year-over-year growth
- Stock P/E ratio of 51.9 sits 15% below its 10-year average of 60.9
Nvidia stock dropped 2.8% to $176.66 in Friday’s premarket session. The decline matched broader market weakness as S&P 500 futures fell 1.4%.
The chip maker faces growing pressure from China. Beijing has actively discouraged domestic customers from purchasing Nvidia’s AI processors.
The numbers tell the story. China accounted for 12% of Nvidia’s revenue over the past four quarters. A year ago, that figure stood at 21%.
This quarter looks bleaker. Nvidia projects zero Chinese revenue. Executives estimate the loss at $2 billion to $5 billion in potential sales.
Other chip stocks suffered too. AMD fell 3.4% while Broadcom dropped 2.7% in premarket trading.
Micron faces similar challenges. The memory chip maker will stop supplying Chinese data centers after Beijing banned its products from critical infrastructure.
Blackwell Chips Drive Growth
Strong demand continues outside China. Nvidia’s Blackwell Ultra GB300 chips deliver 50 times the performance of 2022’s H100 models.
AI reasoning models need this power. CEO Jensen Huang says these models consume 100 to 1,000 times more tokens than earlier versions.
OpenAI, Anthropic, and Meta are all developing reasoning models. The computing requirements keep climbing.
Nvidia plans to launch Rubin architecture in 2026. Reports suggest it will be 3.3 times more powerful than Blackwell Ultra.
Strong Earnings Expected November 19
Wall Street anticipates $54 billion in Q3 revenue. That represents 54% growth year-over-year.
The data center segment should contribute nearly 90% of total revenue. This business drives Nvidia’s growth.
Analysts forecast $1.24 in earnings per share. That would mark 53% growth from last year.
Fourth quarter guidance matters to investors. The Street wants to see $61.1 billion in projected revenue.
Valuation Looks Attractive
Nvidia trades at a P/E ratio of 51.9. That’s well above the Nasdaq-100’s 33.5 ratio.
But here’s the twist. The multiple sits 15% below Nvidia’s 10-year average of 60.9.
Forward estimates paint an interesting picture. Analysts project $4.50 earnings per share for fiscal 2026. Fiscal 2027 estimates reach $6.38 per share.
Those numbers create forward P/E ratios of 40.5 and 28.6. To reach its historical average, the stock would need to climb 113% over 12-18 months.
Huang expects $4 trillion in data center spending through 2030. Nvidia aims to capture a large share of that market.
The stock closed Thursday up 1.1% before Friday’s premarket weakness. Investors now wait for the November 19 earnings report to gauge momentum.
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