Nvidea Equity Research

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NVIDIA, the powerhouse behind the AI revolution, is roaring back to dominance—particularly in the world’s most contentious tech battlefield: China. With the U.S. government reversing a 90-day ban on its H20 GPUs, NVIDIA’s fair value estimate has surged from $140 to $170 per share, according to a fresh Morningstar report.

This isn’t just a price target adjustment—it’s a signal that the semiconductor juggernaut is regaining its footing in the global AI race. The implications ripple far beyond quarterly earnings.

H20 GPU Sales Resume in China

NVIDIA’s H20 GPUs, purpose-built for AI workloads in China, were previously restricted under U.S. export controls. That freeze led to a $5.5 billion write-off and raised questions about NVIDIA’s long-term accessibility to one of its most lucrative markets. Now, with Washington reversing course, the firm is re-inserting $30 billion in projected revenue into its model through fiscal 2027.

Although these chips are “throttled down” versions compared to NVIDIA’s cutting-edge offerings, demand in China remains high—signaling a strategic victory for the company. Morningstar analysts cautiously welcome the policy change, projecting a near-term surge in H20 orders and long-term dominance in Chinese AI infrastructure.

Economic Moat: Deep, Wide, and Defended

NVIDIA’s success is not just about hardware; it’s about its entire ecosystem. The company's proprietary Cuda platform creates massive switching costs, making it hard for competitors to lure developers away. That blend of market-leading GPUs and tightly integrated software has earned NVIDIA a “wide” economic moat rating—a coveted distinction in the world of equity analysis.

While other tech giants like Google, Amazon, and Meta are building their own chips, enterprise customers still demand flexibility. Custom silicon may power internal projects, but for third-party cloud services and AI customers, NVIDIA remains the default choice. The reason? Compatibility, performance, and an ecosystem they can trust.

AI Growth Engine: Data Centers Drive Future Value

NVIDIA’s data center segment is the cornerstone of its current—and future—growth. The numbers are staggering:

  • $182 billion projected revenue in fiscal 2026 (up from $115 billion in 2025)

  • $246 billion expected in fiscal 2027

  • $281 billion forecast for fiscal 2028

This implies a 34% compound annual growth rate (CAGR) from fiscal 2026–2028—up from 29% previously estimated when the China ban was in place.

The surge is driven by relentless AI capital expenditures from hyperscalers like AWS, Google Cloud, and Microsoft Azure, all of whom are expanding data centers to support booming generative AI demand.

Financial Firepower: Profitability at Scale

NVIDIA’s profitability metrics are jaw-dropping:

  • Gross margin: Peaked at 75% in 2025, expected to stabilize around 70%+ through the decade

  • Operating margin: Held steady in the 60% range

  • Return on Invested Capital (ROIC): Projected at nearly 97% in 2025

Even in the face of policy volatility and rising R&D costs, NVIDIA’s blend of premium pricing, scale advantages, and capital discipline continues to deliver shareholder value. The company holds over $53 billion in cash and maintains an exemplary capital allocation rating.

Bottom Line: Dominance Reinforced, Future Bright

NVIDIA has weathered regulatory storms and returned stronger, with its value proposition in AI—hardware, software, and networking—more integrated than ever. With the China ban lifted and growth accelerating across AI workloads, NVIDIA is not just “fairly valued” at $170—it’s poised to extend its leadership into the next generation of computing.

For investors, technologists, and policy makers alike, one thing is clear: NVIDIA isn’t just riding the AI wave. It’s engineering it.