Nvidia Faces Export Restrictions, But Long-Term Growth Potential Remains Intact

Nvidia (NASDAQ: NVDA), the leader in AI chips, has faced recent headwinds after the Biden administration introduced new export restrictions on advanced GPUs. These rules, designed to curb the spread of high-performance AI chips, cap the number of GPUs that can be sold to most countries, creating uncertainty for Nvidia’s global business.

New Export Guidelines

Under the Interim Final Rule on Artificial Intelligence Diffusion, 18 countries face no restrictions on purchasing GPUs, while 24 countries are outright banned. Most other nations must secure licenses to buy over 1,700 GPUs, with maximum purchase limits ranging from 50,000 to 320,000 GPUs over two years.

Nvidia has expressed strong opposition to these measures, criticizing the lack of transparency in their development and warning of potential damage to U.S. innovation and economic growth. The company has appealed to the incoming Trump administration, citing its prior support for foundational AI technologies.

Revenue and Market Impact

While the restrictions may disrupt Nvidia’s sales to certain regions, the company’s largest markets remain largely unaffected. Key revenue contributors like the U.S. (45%) and Taiwan (17%) are exempt from the new limits. China, already under existing restrictions for advanced GPUs, accounted for 13% of Nvidia’s revenue in 2024.

The new rules could impact AI data center expansion in regions such as the Middle East and India, which are emerging hubs for AI technology. For example, India recently completed its first AI data center using 60,000 GPUs, highlighting the growing demand for these chips in developing markets.

The restrictions could also pose challenges for training large-scale AI models, such as Meta’s Llama 4 and xAI’s upcoming models, which require hundreds of thousands of GPUs. Some companies are even exploring GPU clusters with over 1 million chips to develop next-generation AI technologies.

The Role of Hyperscalers

Nvidia’s growth remains closely tied to hyperscalers—large cloud computing companies like Amazon, Microsoft, and Alphabet—which accounted for 34% of its revenue in the first nine months of fiscal 2025. These companies are expected to play a key role in navigating the new export restrictions by establishing partnerships in impacted regions.

For instance, Microsoft has already partnered with the United Arab Emirates and stated it can meet global AI technology needs while adhering to U.S. export rules. This “tech gatekeeper” approach allows countries to pursue AI development without violating export restrictions.

Investment Outlook

Despite the challenges posed by the new export rules, Nvidia’s valuation remains compelling. The stock trades at a forward price-to-earnings (P/E) ratio of just under 30, with a price/earnings-to-growth (PEG) ratio below 1—indicating it may be undervalued relative to its growth potential.

The demand for GPUs, driven by AI development and cloud computing, is expected to remain strong. While the restrictions may create short-term uncertainties, Nvidia’s leadership in the AI chip market and its reliance on hyperscalers for growth position it well for the future.

Bottom Line

For investors, Nvidia’s current valuation and dominance in the AI sector make it an attractive long-term buy, even amid the challenges of tighter export controls. The company’s ability to adapt and capitalize on partnerships with hyperscalers could ensure sustained growth and innovation in the years ahead.