The Rundown - Deep Dive: Why Nvidia’s Future is in Trump’s Hands

Episode Date: March 1, 2025

Nvidia is caught in a geopolitical storm, with U.S. export restrictions, rising competition from China’s DeepSeek, and pressure from both Wall Street and Washington. Now, the Trump administration faces a critical decision: tighten AI restrictions even further or ease up to keep U.S. companies competitive. In this episode, we break down Nvidia’s latest earnings, the battle over AI dominance, and what’s next for the most important tech company in the world.Listen to Leading Indicator episode with Nvidia analyst Gil Luria hereThe content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures.Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome back to the rundown for this week's deep dive. Today, we are talking about the future of Nvidia. The company just dropped another monster earnings report. Revenues continued to skyrocket profits nearly doubled, and yet the stock still took a hit. So now investors are wondering, is this as good as it gets for Nvidia? Well, there seems to be a bigger story unfolding here, from slowing growth to new competition in China to U.S. regulators tightening the screws. Invidia is facing pressures from all sides.

So in today's episode, we're talking about Nvidia's battle for AI dominance and geopolitical tensions that could shake up the entire industry. We got a great one for you today. Let's dive in. Let's first start by going through Nvidia's latest earnings report because their Q4 was ridiculous. Sales were up 78% to $39 billion and profits nearly doubled to $22 billion. That's very impressive for a company the size of Nvidia. Now, diving a bit deeper, Nvidia's data center revenue, which is their AI business,

was up 93% on an annual basis. The data center revenue now makes up 91% of Nvidia's total revenue. That's up from 83% from last year, and it was just 60% two years ago. But I guess that's what happens when every tech company on Earth is racing to build AI infrastructure and needs to get their hands on the latest AI chips. But here's the thing. Nvidia's growth is slowing. Nvidia has now reported four straight quarters of slowing sales growth, and Q4 was its smallest rate of growth in the last

seven quarters. They're still beating expectations, but by a smaller and smaller margin each quarter. Now, to keep the hype alive, NVIDIA is talking a lot about their new Blackwell AI chip, with NVIDIA CEO Jensen Huang saying the demand for these chips is amazing. In fact, the company pulled in $11 billion in revenue from Blackwell chips in Q4 alone, and they said that's the fastest product ramp in the company's history. But there's a catch-22 here for NVIDIA. New product launches, especially at this scale, tend to squeeze Nvidia's margins. Invita's forecast for their Q1 margins is 71%, which is less than the 72% that Wall Street was expecting. And that was one of the metrics that investors were not so thrilled about.

Still, the demand for Blackwellis shows that AI spending is alive and well. CapEx spending by these big tech companies is expected to normalize eventually. But as of right now, big tech has signaled they have no intentions of pulling back for 2025. So Nvidia has really taken advantage of being the only game in town when it comes to making the best AI chips. And that's why their stock price has shot up over the last three years. But there is a lot of uncertainty on the road ahead. A lot of that has to do with geopolitical tensions between the U.S. and China, and the rapid rise of Deepseek has added even more fuel to that fire. So let's talk more about that. First, it's important to contextualize how important China is for Nvidia. Sales to China make of about 15% of

NVIDIA's total revenue, which is a significant chunk, but Jensen said that NVIDIA's China revenue is half of where it was before restrictions were imposed by the U.S. government. Chip export restrictions first were imposed by the Biden administration, and now with Trump back in the White House, the restrictions could get even tighter. Just to give you an idea of where this could be headed, just listen to Howard Lutnik, the new U.S. Secretary of Commerce, who said the U.S. needs to get tougher on AI exports to China. We need to stop helping them, you know, open platforms. Meta's open platform, let Deepseek rely on it.

Invidius chips, which they bought tons of, and they found their ways around it, drive their deep seek model. It's got to end. We, if they're going to compete with us, let them compete, but stop using our tools to compete with us. And this is an issue that politicians from both sides of the aisle seem to agree on. Earlier this month, Senator Elizabeth Warren and Josh Hawley wrote a letter published in the Washington Post. Yes, that actually happened, urging Lutnik to toughen the restrictions on chip controls in order to slow down China's AI progress. In fact, they called the emergence of China's deep seek as an export failure by the U.S. Taking it a step further, the senators threw shade at corporate lobbyists for creating the loopholes in the export controls

that are allowing deep seek and other Chinese entities to get their hands on U.S. AI chips. Specifically, Nvidia's state-of-the-art chips. So the senators want to close that loophole. Now, Invidia argues that if the U.S. government does lock them out of China completely, it'll just hand the entire China AI market to companies in China, like Huawei. Huawei is at the center of China's strategy to become more self-reliant on AI technology and counteract the restrictions posed by international supply chain restrictions. They've been gaining ground fast with their own AI chip line called Ascend.

So it's a tough spot for Nvidia because they can't sell to the Chinese market and they might lose that entire emerging Chinese market to Chinese companies. So, NVIDIA's future might end up coming down to export restrictions and something called the AI diffusion rule. So let's talk more about this rule. One of President Biden's big moves before leaving office was enacting the AI diffusion rule. It was introduced in January of this year. This rule was designed to keep cutting edge AI tech away from China, Russia, Iran, and North Korea.

And here's how it works. The rule sorts countries into three tiers, the U.S. and its closest allies like the UK, Japan, and Germany. are in the top tier, meaning the AI trade flows pretty freely to those countries. Then you have 150 middle tier countries where AI exports are allowed, but heavily restricted. And finally, you have the bottom tier. These countries, including China, are completely cut off from getting high-performance AI tech. And that's where things get complicated and where the loopholes start sneaking in. For one, the rule doesn't outright ban companies like Nvidia from selling to China.

It just forces them to sell weaker, heavily down. graded versions of their chips. In fact, Nvidia created a special chip specifically designed to sell to China called the H20 chip. It's a less powerful alternative to its high-end AI chips

designed specifically to comply with these restrictions. You also have the Singapore loophole where companies in Singapore are ordering Nvidia's AI chips and then turning around and shipping them to China. Now, this AI diffusion rule

is still in a 120-day review period, meaning it's not fully locked in yet. And now that Trump is back in the office, it's anyone's guess whether he'll tighten the screws, even further or just scrap the whole thing entirely. But whatever happens next and whatever Trump decides to do could have massive implications, not just for Nvidia, but for the entire AI race between US and China. Like, Nvidia isn't the only company worried about all of this.

Even Microsoft is saying the AI diffusion rule goes too far. This past week, Microsoft's president Brad Smith sent a letter to the Trump administration, warning that if the US gets too aggressive with export controls, it could backfire. Countries that can't get U.S. that can't get U.S. AI tech might just turn to competitors like China, hurting not just Nvidia, but Microsoft, Amazon, and the entire U.S. tech industry. And to be clear, Microsoft isn't calling for the AI diffusion rule to be completely repealed. The company acknowledges that it has merits, but it says the rule goes too far by limiting AI trade with allies that are being labeled as tier two, and that the U.S. might be shooting itself in the foot by locking out too many countries and putting them in that

middle tier. So there's a lot at stake here, not just for Invidia, but also the U.S.'s dominance in AI. Ultimately, it could all come down to Donald Trump. If he decides to tighten the screws on U.S. chip exports, that could have a significant impact on Nvidia's growth, not just in the short term, but also the long term. Invitea's future, and maybe all of tech, could be in the hands of Donald Trump.

So where does this all leave Nvidia? Well, they're still the king of AI chips for now. But pressure is mounting from all sides, specifically when it comes to competition from China, tighter U.S. export controls, and higher expectation from Wall Street. The Trump administration has some huge decisions to make and the AI diffusion rule is right at the center of it all.

One thing is clear, the AI boom isn't slowing down and Big Tech isn't backing off. But the balance of power, who controls AI's future and who gets left behind, that's still up for grabs. Well, all right, guys, that's it for this week's deep dive. If you guys enjoyed today's episode, please consider giving us a five-star rating on Apple or Spotify.

We filmed these deep dive episodes with videos, so check us out on YouTube or Spotify to watch the video. Also, if you want to do an even deeper dive on Nvidia's earnings and the China Trump situation, check out public.com's leading indicator podcast. They just dropped an episode with a top Wall Street analyst who still expects Nvidia to have a massive year despite all the risks that we just talked about.

We'll put the link for that episode in the description. Thank you guys again for listening and watching. Shout out to Mike and the team over at Public for all the help behind the scenes. We'll see you guys back here on Monday. Thank you.