<div id="readability-page-1"><p>If you're an <strong>Nvidia</strong> <span>(NVDA<span> 1.89%</span>)</span> investor, then you're familiar with the roller coaster that comes with Nvidia stock -- the ups and downs as Washington and Beijing duke it out, with Nvidia and its shareholders caught in the middle.</p> <p>August 22 brought another unexpected drop that may be leaving some investors shell-shocked. But I don't think it's worth getting off this ride now -- particularly as Nvidia's all-important quarterly earnings are around the corner.</p>  <h2>The backdoor issue</h2> <p>The new developments are connected to Nvidia's H20 high-functioning chips, which the company had made specifically for the Chinese market to comply with U.S. export restrictions on advanced artificial intelligence (AI) chips. The chips have been in the news a lot this year. You may remember that in the first quarter of fiscal 2026, Nvidia disclosed it took a $4.5 billion inventory charge because export restrictions prevented it from selling the H20 chips. </p> <p>Then this summer, Nvidia struck a deal with the Trump administration that would open the Chinese markets to them in exchange for 15% of revenues from the H20 sales.</p> <p>While the export restrictions seem to be handled, Nvidia is now facing additional problems from Beijing. China reportedly asked tech companies and AI developers not to use the H20 chips, particularly for government purposes. Beijing also approached Nvidia to ask if the chips have tracking technology that would allow them to be operated remotely. CEO Jensen Huang said the company assured the Chinese government that backdoors do not exist, but the discussions are continuing.</p> <p>&#34;As you know, [Beijing] requested and urged us to secure licenses for the H20s, for some time and I've worked quite hard to help them secure the licenses, and so hopefully this will be resolved,&#34; he told reporters in Taiwan, according to CNBC. </p> <p>Media outlet The Information reported Friday that Nvidia is now asking some of its suppliers, including <strong>Amkor Technology</strong> and <strong>Samsung</strong>. Reuters reported that Nvidia also asked <strong>Foxconn</strong> to stop H20 production.</p> <p>That's news that could frighten investors -- Nvidia stock is up over 30% so far this year, and sentiment has been high that the resumption of H20 sales could further fuel returns.</p> <div><p><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MzA3NzAvZ2V0dHlpbWFnZXMtMTE5NTU3NDc2Ni5qcGcmdz03MDA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MzA3NzAvZ2V0dHlpbWFnZXMtMTE5NTU3NDc2Ni5qcGcmdz03MDA"/></p><p>Image source: Getty Images.</p> </div> <h2>Earnings are around the corner</h2> <p>Nvidia and Huang will surely have a lot to say about the H20 issue when Nvidia reports its fiscal 2026 Q2 earnings after the closing bell on Aug. 27. Analysts at Yahoo! Finance are expecting earnings per share of $1.01, versus $0.68 per share a year ago. The consensus revenue estimate is $46.12 billion, up 53% from the same quarter a year ago. </p> <p>Nvidia is a powerhouse because of its overwhelming power in the graphics processing unit (GPU) market, where it's estimated to have more than 90% of the market share. And as some of the company's biggest customers said they intend to increase spending in their data centers to further power the AI and advanced computing platforms, Nvidia appears to be in a solid position for this week's report -- even without the Chinese H20 sales.</p> <p>In fact, I'm suggesting that Nvidia's plan to scale back production, even temporarily, is a good one. The company already has billions of dollars in H20 inventory and took a huge charge in the first quarter because it wasn't able to move the product. Why keep building when roadblocks keep popping up in Washington and now Beijing?</p> <p>Analysts surely aren't concerned. In fact, many increased their price targets on Nvidia stock in recent days.</p> <div><table> <tbody> <tr> <th scope="col">Date</th> <th scope="col">Analyst</th> <th scope="col">Old Price Target</th> <th scope="col">New Price Target</th> </tr> <tr> <td>Aug. 22</td> <td>Evercore</td> <td>$190</td> <td>$214</td> </tr> <tr> <td>Aug. 21</td> <td>Wedbush</td> <td>$175</td> <td>$210</td> </tr> <tr> <td>Aug. 20</td> <td>KeyBanc</td> <td>$190</td> <td>$215</td> </tr> <tr> <td>Aug.19</td> <td>TD Cowen</td> <td>$140</td> <td>$245</td> </tr> <tr> <td>Aug.18</td> <td>Morgan Stanley</td> <td>$200</td> <td>$206</td> </tr> </tbody> </table></div> <p>Source: Yahoo! Finance</p> <p>I'm fully expecting a solid earnings report on Aug. 27, but like other investors, I'll be keenly interested in the H20 developments. When Nvidia is finally able to freely sell in China, it will be another tailwind for the biggest publicly traded company on the planet. But it's not the only positive catalyst for Nvidia stock.</p>                                                                            </div>

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<p>Nvidia faces new challenges in China as the government discourages the use of its H20 chips, which were designed to comply with U.S. export restrictions. Despite a recent stock drop, analysts remain optimistic ahead of Nvidia's Q2 earnings report on August 27, expecting earnings per share of $1.01 and revenue of $46.12 billion. The company has a dominant position in the GPU market and is scaling back H20 production due to ongoing geopolitical tensions. Analysts have raised their price targets for Nvidia stock, indicating confidence in its future performance.</p>

- Nvidia investors are experiencing volatility due to ongoing tensions between Washington and Beijing, particularly concerning the H20 chips designed for the Chinese market.  
- Despite recent challenges, including a request from China to avoid using H20 chips for government purposes, Nvidia is expected to report strong earnings on August 27, with analysts predicting significant revenue growth.  
- The company's dominant position in the GPU market and potential resolution of H20 sales in China could further enhance its stock performance.

Nvidia Faces New China Risks -- Should Investors Stay the Course?