This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
On April 2, President Trump gave a commanding speech at the White House during which he outlined a plethora of new tariffs that would be applied to just about every country around the world. In the grand scheme of things, though, there are only a few geographic regions where the President really wants to rebalance trade relations. Chief among these countries is China.
Over the last month and a half, semiconductor powerhouse Nvidia (NASDAQ: NVDA) has been a tangential talking point as it relates to tariff negotiations with China.
Let's explore why China is such an important market for Nvidia. Moreover, I'll outline a number of growth opportunities beyond the region and make a case for why I'm still confident in Nvidia's long-term prospects should its business in China begin to contract.
How much revenue does Nvidia generate from China?
Per Nvidia's latest 10-K filing, the company's revenue breakdown by geography is as follows:
| Region | Revenue ($) | Revenue (%) |
|---|---|---|
| United States | $61.2 billion | 47% |
| Singapore | $23.7 billion | 18% |
| Taiwan | $20.6 billion | 16% |
| China (including Hong Kong) | $17.1 billion | 13% |
| Other | $7.9 billion | 6% |
| Total | $130.5 billion | 100% |
Data source: Investor Relations.
From the figures above, it would appear that China makes up 13% of Nvidia's total revenue base. However, a footnote in the company's filings may offer a clue as to how much is really at stake here.
Per the notes in the 10-K, "Customers use Singapore to centralize invoicing while our products are almost always shipped elsewhere." Piggybacking off these details, there have been a number of reports that suggest much of Nvidia's products that are routed through Singapore end up in China.
For the sake of this analysis, I'll lump Singapore and China together -- implying that up to roughly 31% of Nvidia's revenue could face some serious headwinds depending on the outcome of U.S. trade negotiations with China and how new policies could impact export controls.
Why other regions of the world could become bigger opportunities for Nvidia
I'm not going to deny that Nvidia's exposure to China and neighboring countries isn't a risk. The silver lining I see from the financial profile above is that other regions of the world could emerge as new growth opportunities for Nvidia and perhaps eclipse the company's current business in China. Let's explore some recent developments involving Nvidia and other countries outside of China.
Last week, President Trump traveled to the Middle East, and while over there, he helped forge some new deals that could be major catalysts for AI infrastructure players such as Nvidia.
The Kingdom of Saudi Arabia's (KSA) public investment fund runs a subsidiary called Humain, which specifically focuses on making investments in artificial intelligence (AI). Per a recent announcement, Humain and Nvidia are partnering to build AI factories across the KSA. Humain will deploy "several hundred thousand" Nvidia GPUs over the next five years, with the initial phase comprising 18,000 of Nvidia's latest Blackwell architecture.
In addition, Reuters recently reported that a deal has been made between Nvidia and G42, a company located in the United Arab Emirates (UAE). Reports suggest that Nvidia will supply the UAE with 100,000 chips to build a new AI data center scheduled to be up and running as soon as next year. Of note is that Nvidia will be working with Oracle, Cisco, SoftBank, and OpenAI as part of this infrastructure project, which is dubbed Stargate UAE.
Is Nvidia stock a buy now?
Depending on what happens with China, it very well could be the case that Nvidia's growth shows some signs of deceleration in the near term.
However, I'm encouraged by the fact that some of the new deals with the Middle East are multiyear projects. This suggests that countries such as Saudi Arabia and others in the region are committed to AI infrastructure for the long haul, which should bode well for Nvidia down the road.
But right now, compression in Nvidia's forward earnings multiple could suggest that investors are concerned about the company's future. I think this is primarily because people are focusing on the China situation.
NVDA PE Ratio (Forward) data by YCharts
I think Nvidia is going to be just fine, regardless of what its prospects in China end up looking like. To me, the deals with Middle Eastern countries underscore how important Nvidia's chips are in the broader AI movement. Another way of saying this is that any business Nvidia might lose in China appears to be getting absorbed by other countries -- and I don't see these dynamics going away.
Between its compelling valuation profile and various new relationships unfolding, I'm encouraged by Nvidia's prospects and see the stock as a no-brainer right now for investors with a long-run time horizon.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
