The chip maker

 said on Monday evening that it is filing applications with the U.S. government to sell its specially designed H20 chips in China again, after the Trump administration essentially banned those sales in April. The company said that it has been “assured” by the government that it will be granted the necessary licenses to sell the downgraded version of its Hopper chips, and that it “hopes to start deliveries soon,” according to a company blog post.

Nvidia Chief Executive Jensen Huang also told customers that the chip maker has a new Nvidia RTX Pro graphics processing unit that is fully compliant with U.S. export controls. The new GPU “is ideal for digital twin AI for smart factories and logistics,” Huang said, according to the post.

When asked about the policy change in an interview with Bloomberg TV, U.S. Treasury Secretary Scott Bessent likened the H20 ban to “a negotiating chip that we used in Geneva and in London,” referring to locations where the U.S. and China have recently held trade talks.

See more: Nvidia teases a win for its China business, and big money could be on the line

With Nvidia’s China business potentially back on track, analysts are optimistic about the company’s revenue potential after it previously estimated that the restrictions led to a loss of $2.5 billion in first-quarter revenue and could cause a revenue loss of $8 billion in the second quarter.

Melius Research analysts led by Ben Reitzes said in a Tuesday note to clients that the announcement “not only means that Nvidia’s revenues accelerate even more sequentially in the back half” of fiscal 2026 but will also be “a huge tailwind” for the company’s growth in the first half of fiscal 2027, making it “a much bigger growth year than the previous consensus of just 26%.” The analysts added that they “wouldn’t be surprised if all or most of the $8 [billion] run rate/quarter in lost China sales came back completely” by the fourth quarter of fiscal 2026.

The Melius team raised its estimates and price target for the chip maker to $235, which would translate to a $5.73 trillion market capitalization. Nvidia crossed the $4 trillion mark last week.

See more: Nvidia officially gets its $4 trillion finish. Here’s what could come next.

“China is a key market with huge growth potential,” the analysts said, pointing out that Nvidia has commented that half of the world’s AI developers are based in the country. “Now Nvidia can better compete with Huawei — not only in the China market, but globally making sure more Chinese AI developers can create applications on a U.S.-friendly Nvidia AI stack.”

With two weeks left in the fiscal second quarter, Bernstein analysts said in a note to clients on Tuesday that “it seems unlikely” Nvidia will be able to ship much to China in this period, but they “might expect substantial catch-up in the [second half], as well as (hopefully) some release of the sizable ($4.5B) inventory reserve they took.”

Nvidia said it took a $4.5 billion charge in the fiscal first quarter from “excess inventory and purchase obligations as the demand for H20 diminished.” However, Bernstein noted that it’s not clear if Nvidia will be able to get licenses to sell to all of its Chinese customers.

Every $10 billion of its China revenue that Nvidia recovers could boost earnings per share by 25 cents, the Bernstein analysts said. Therefore, if Nvidia sees $15 billion to $20 billion in revenue from China through the rest of the fiscal year, the analysts said that would translate to 40 cents to 50 cents in EPS upside for fiscal 2026.

But in a note later Tuesday, following a discussion with Chief Financial Officer Colette Kress, the Bernstein analysts said a revenue range between $10 billion to $15 billion “might be more appropriate,” as it could take some time for Nvidia to get to “a full quarter’s shipments.” That would mean potentially 25 cents to 40 cents in EPS upside.

The Bernstein team also said that Nvidia is likely expecting “strong demand for their newly announced Blackwell-based RTX GPU” in an eventual shift away from the H20.

If Nvidia does get licenses to resume its business in China, the company could “sell through the written-down H20 inventory at near 100% [gross margins],” Cantor analysts said in a Tuesday note. That would set Nvidia up for upside relative to its target gross margin in the mid-70% range in the second half of this year.

Advanced Micro Devices Inc. shares were rising as well on Tuesday, up 7% after the company said it was “recently informed” by the U.S. Commerce Department that its applications for licenses to export its MI308 chips to China are “moving forward for review.” The company said it expects “to resume shipments as licenses are approved,” according to a statement provided to MarketWatch.

The Melius team also kept their buy rating and $175 price target for Advanced Micro Devices Inc.

 on expectations that the company would follow in getting approval to sell its MI308 GPUs in China again, which would add “even more upside for them.”

“Now that China is back in the [total addressable market], expect multiples to benefit — assuming Washington doesn’t change their mind,” Melius said, referring to the idea that investors could come to value the stocks more favorably with the China cloud lifted.

https://www.marketwatch.com/story/nvidias-stock-pops-as-china-win-may-pave-the-way-for-5-trillion-market-cap-and-beyond-e071d628