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NVIDIA (NVDA +5%) is making a strong move higher after the AI chip giant reported EPS upside with its Q1 (Apr) results last night. Revenue jumped 69.2% yr/yr to $44.06 bln, which also was better than expected. Investors also seem pleased with its Q2 (Jul) revenue guidance of $44.10-45.90 bln, which reflects a loss in H20 revenue of approximately $8 bln due to the recent export control limitations. Guidance was a bit light, but we are not sure it's comparable to consensus.

• Another positive was that the H20 inventory write down charge related to export controls was less than expected at $4.5 bln vs prior guidance of $5.5 bln as NVDA was able to reuse certain materials. So, that was positive news. On April 9, the US govt issued new export controls on H20, its data center GPU designed specifically for the China market. Its H20 has been in the market for over a year and does not have a market outside of China.
• Its Data Center segment really stood out in Q1 with revs of $39.1 bln, up 73% yr/yr and 10% sequentially. NVDA said AR workloads have transitioned strongly to inference, and AI factory build outs are driving significant revenue. Importantly, its customers' commitments are firm. Its Blackwell ramp, the fastest in the company's history, drove Data Center revs. Blackwell contributed nearly 70% of Data Center compute revenue in the quarter, with the transition from Hopper nearly complete. NVDA is witnessing a sharp jump in inference demand. OpenAI, Microsoft and Google are seeing a step function leap in token generation.
• Its other major segment is Gaming and AI PC, where revenue was a record $3.8 bln, up 42% yr/yr and 48% sequentially. Strong adoption by gamers, creatives and AI enthusiasts have made Blackwell its fastest ramp ever. Against a backdrop of robust demand, NVDA greatly improved supply and availability in Q1. In Q1, NVDA added to its AI PC laptop offerings, including models capable of running Microsoft's CoPilot+.
• Looking ahead to Q2, NVDA expects Data Center to benefit from the continued ramp of Blackwell, which will be partially offset by a decline in China revenue. On export controls, NVDA noted China is one of the world's largest AI markets and half of the world's AI researchers are based there. The platform that wins China is positioned to lead globally. However, the $50 bln China market is now effectively closed to US industry. China's AI moves on with or without US chips.

Two main things seem to be driving shares higher today. First, and most importantly, its Data Center segment continues its robust growth despite the H20 setback. AI factory build outs are driving significant revenue. Its Blackwell ramp continues unabated, which is helping mitigate an expected meaningful decrease in China Data Center revenue in Q2. Our sense is that the $8 bln revenue impact in Q2 was better than feared. Second, the $4.5 bln H20 charge was less than expected. While issues persist, especially with China, it seems investor sentiment on NVDA is back on the upswing.