TLDR
- Nvidia stock dropped 2.8% to $176.66 in premarket trading on Friday, matching broader market declines as S&P 500 futures fell 1.4%
- Chinese authorities have discouraged domestic customers from using Nvidia’s AI processors, causing China revenue to fall from 21% to 12% of global total
- Nvidia forecasts zero Chinese revenue for the current quarter, representing a potential loss of $2 billion to $5 billion in sales
- The company reports fiscal Q3 2026 earnings on November 19, with Wall Street expecting $54 billion in revenue and $1.24 earnings per share
- Nvidia’s stock trades at a P/E ratio of 51.9, which represents a 15% discount to its 10-year average of 60.9
Nvidia shares fell 2.8% to $176.66 in premarket trading Friday. The drop came as S&P 500 futures declined 1.4% on fears over regional banks.
The chip maker’s troubles with China appear to be deepening. Chinese authorities have discouraged domestic customers from using Nvidia’s artificial intelligence processors.
The impact shows up in the numbers. Over the past four quarters, China revenue accounted for 12% of Nvidia’s global total. That’s down from 21% a year earlier.
The current quarter looks even worse. Nvidia forecasts zero Chinese revenue for the period. Company executives say this represents a potential loss of $2 billion to $5 billion in sales.
Other chip makers felt the pain too. Advanced Micro Devices dropped 3.4% in premarket trading. Broadcom fell 2.7%.
Micron Technology faces similar pressure from Beijing. Reuters reported Friday that the memory chip maker will stop supplying server chips to Chinese data centers. Beijing banned Micron products from critical infrastructure.
New Chips Driving Demand
The China situation hasn’t stopped demand elsewhere. Nvidia’s latest Blackwell Ultra GB300 graphics processing units deliver up to 50 times more performance than the H100 chips from 2022.
AI reasoning models need this extra power. CEO Jensen Huang says these models consume between 100 and 1,000 times more tokens than earlier versions. They spend time “thinking” in the background to produce better results.
Every major AI company is working on reasoning models now. OpenAI, Anthropic, and Meta Platforms are all racing to build them.
Next year brings another upgrade. Nvidia plans to release the Rubin GPU architecture. Rumors suggest it will be 3.3 times more powerful than Blackwell Ultra. That would make it about 165 times more powerful than Hopper.
November Earnings in Focus
Wall Street expects big numbers when Nvidia reports on November 19. The company’s guidance points to around $54 billion in revenue for the fiscal Q3 2026. That represents 54% growth from the same period last year.
The data center segment will drive most of that revenue. Analysts expect it to account for nearly 90% of the total.
Earnings per share should hit $1.24 according to consensus estimates. That would mark 53% year-over-year growth.
The fourth quarter guidance matters too. Wall Street wants to see a forecast of $61.1 billion in revenue. Anything higher could push the stock up.
The valuation looks interesting right now. Nvidia trades at a price-to-earnings ratio of 51.9 based on trailing 12-month earnings of $3.56 per share.
That’s well above the Nasdaq-100 index P/E of 33.5. But it’s actually 15% below Nvidia’s 10-year average P/E of 60.9.
Looking ahead, analysts project earnings of $4.50 per share for fiscal 2026. For fiscal 2027, they see $6.38 per share. Based on those estimates, the forward P/E ratios work out to 40.5 and 28.6 respectively.
If the stock were to trade at its historical average P/E, it would need to climb 113% over the next 12 to 18 months.
Huang believes data center operators will spend $4 trillion through 2030 upgrading infrastructure for AI. Nvidia’s position in this market remains strong despite the China headwinds.
The stock closed up 1.1% on Thursday before Friday’s premarket decline.
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