Nvidia’s AI power play: What the market is really pricing in

Nvidia has become the gravitational centre of the AI economy, influencing everything from chip supply to geopolitics. Its latest quarter underscored the scale of that dominance, with revenue reaching $57 billion and data center sales rising 66% year-over-year. Yet the story surrounding the stock has widened beyond earnings beats and supply shortages.

Regulators, global politics, and renewed competition for AI infrastructure contracts now shape investor expectations as much as product cycles. Nvidia’s near-term outlook hinges on whether demand can stay ahead of the tightening web of export rules and rising capital expenditure from rivals.

What’s driving Nvidia’s momentum?

A rush of global AI spending continues to propel Nvidia’s growth. The company described its cloud partners as “sold out,” signalling another year where supply may struggle to meet demand. Market researchers expect the AI chip industry to reach $286 billion by 2026, up from $207 billion in 2025 . That tight supply environment strengthens Nvidia’s pricing power and reinforces its role as the hardware gatekeeper for generative AI.

Geopolitics, rather than technology alone, is adding new layers to the narrative. President Trump’s approval for Nvidia to export H200 chips to selected Chinese customers reopened a revenue stream that had dwindled under earlier restrictions. 

The catch is a 25% revenue-sharing requirement with the U.S. government, far higher than the previous 15% fee applied to the weaker H20 accelerator. The compromise grants Nvidia partial access to a once-critical market, but only under terms designed to remind investors that the regulatory backdrop is anything but settled.

Why it matters

China once accounted for around a quarter of Nvidia’s revenue, so any pathway back into the region carries strategic weight. Analysts note that current financial forecasts assume almost no meaningful contribution from China, meaning H200 shipments could provide upside rather than patching a hole. The revenue-sharing fee, however, eats into margins and underscores how political clearance can come at a price. It also raises a legal debate about whether such arrangements constitute export taxes.

Some fund managers see the mixed signals around China as part of a broader recalibration. Morgan Stanley recently raised its target to $250, arguing fears of market-share erosion are overstated and that Nvidia remains the “AI hardware king.” Their commentary captures a wider sentiment: the bottleneck for AI compute still runs through Nvidia’s supply chain. Any sign of loosening in tight markets - even partial - can ripple through the sector’s valuation models.

Impact on the tech market

The export decision triggered immediate interest from ByteDance and Alibaba, which reportedly want large allocations of the newly approved H200 chips. Their enthusiasm illustrates China’s hunger for higher-performance computing after months of relying on the far weaker H20. At the same time, Beijing’s caution about foreign chips and Nvidia’s limited H200 output creates uncertainty. Investors interpret China as a volatile bonus opportunity rather than a dependable growth pillar.

Meanwhile, Nvidia’s own technology roadmap is expanding the competitive moat. Its upcoming Blackwell and Rubin chips sit at the centre of what management describes as “visibility to a half-trillion dollars” in future AI revenue. The company has also rolled out location-verification software to curb chip smuggling - a pre-emptive effort to stay ahead of regulators after reports of grey-market attempts to move $160 million worth of hardware into China. Such tools may cool demand in sensitive jurisdictions but strengthen Nvidia’s credibility as a compliant supplier.

The wider tech sector continues to be pulled into Nvidia’s orbit. Oracle’s stock sell-off - down 11% after reporting weaker revenue despite heavy AI spending - dragged Nvidia and other AI names lower on the day. The episode revealed how tightly investor sentiment is now wired to any signal about the AI capex cycle, particularly from companies competing for the same infrastructure contracts. Market reactions show that Nvidia may hold sector-leading fundamentals, but it does not operate in isolation.

Expert outlook

Analysts remain overwhelmingly bullish despite the regulatory twists. Across major platforms, average 12-month price targets range from $248 to $258, implying a roughly 30–40% upside from recent levels. Evercore ISI and Cantor Fitzgerald see scope for the stock to clear $300 in 2026 if AI infrastructure spending maintains its current trajectory. Their assumptions hinge on Nvidia continuing to monopolise high-end accelerator demand, with free cash flow possibly exceeding $100 billion a year within two years.

Longer-term projections stretch into far more ambitious territory. Some multi-year models imagine Nvidia approaching a $20 trillion market cap by 2030, depending on how quickly the world scales AI computing. These scenarios rely on a future where data centre expansion, autonomous systems, and edge AI form a continuous upgrade cycle rather than a peak-and-plateau dynamic. The biggest unknown is geopolitical stability: new export rules or supply-chain constraints could slow the cycle just as effectively as falling demand.

Key takeaway

Nvidia remains the indispensable engine of the AI boom, even as politics and export rules tighten around it. Strong demand, record earnings, and an unmatched product pipeline continue to outweigh the risks. The reopening of China - partial and costly as it is - adds an unexpected layer of upside to the story. The next signals to watch will be Blackwell’s rollout, regulatory shifts in Washington and Beijing, and whether cloud providers remain capacity-constrained through 2026.

Nvidia technical insights

NVIDIA is stabilising above the $175 support level after a weeks-long pullback, with the Bollinger Bands beginning to narrow as price consolidates. The RSI is rising gradually from the midline, signalling a mild improvement in momentum, but not yet enough to confirm a bullish reversal. 

Upside attempts face resistance at $196 and $207, where previous rallies have triggered profit-taking. A break below $175 would risk fresh liquidations, while sustained closes above $196 would be the first sign that buyers are regaining control.

‍