The dominoes are now falling with brutal efficiency. In one devastating week, the U.S. government severed Nvidia’s China revenue artery while TSMC plunged a 30% cost dagger into its margins. This isn’t coincidence – it’s causation. I have warned since 2024 that Nvidia’s “AI supremacy” was a carefully crafted mirage. The H20 ban with only a ~$5bn write-off loss announced by the company as a consequence proves what I exposed for years, the last time in “THE NVIDIA FAKE AI NARRATIVE IS OFFICIALLY OVER” – their China strategy was always a shell game. TSMC’s price hike confirms what I address in “THE REAL ERA OF AI BEGINS, THE ONE OF THE AI CHARLATANS ENDS” about shifting power dynamics. Together, they expose the ugly truth: Nvidia’s record margins weren’t won through innovation but through supply manipulation and geopolitical gambling.
The math is now unforgiving:
China’s 25% revenue share vanishes into thin air exactly as production costs skyrocket. The “growth engine” that analysts worshipped was really a house of cards built on artificial scarcity and export loopholes, and Nvidia has no moves left. Furthermore, it is naive not to expect U.S. regulators to take a closer look at Nvidia’s international operations; this will likely end in a steep fine for breaching U.S. export control rules for years.
What comes next will be brutal. Earnings guidance will implode. Inventories will balloon. Lawsuits will multiply. Because when your business model depends on everyone playing along – regulators, suppliers, investors – the collapse is spectacular when they stop. The consequences are immediate and severe. China represented approximately 25% of Nvidia’s official data center revenue, a revenue stream that has now evaporated without warning. More troubling is Nvidia’s apparent lack of contingency planning; no alternative markets exist at a sufficient scale to compensate for this sudden shortfall while the company, like a broken record, kept claiming they had “overwhelming demand” and were dealing with “tight supply”.
In many articles (all archived here), I exposed the artificial nature of Nvidia’s “record” sales, which were sustained not by genuine demand but through carefully orchestrated supply constraints and accounting shenanigans. The coming inventory glut will lay bare this discrepancy, as warehouses fill with products that no longer have a market.
The strategic implications extend far beyond quarterly earnings. This episode reveals fundamental flaws in Nvidia’s business model: an overreliance on geopolitical maneuvering rather than technological differentiation.
Market observers now face serious questions: How will Nvidia explain this strategic miscalculation to shareholders? What valuation adjustments will be necessary when artificial scarcity can no longer prop up margins? And most critically: does Nvidia possess the innovative capacity to survive in a market that increasingly values genuine technological advancement over financial engineering?
The reckoning has arrived. The only uncertainty is how deep the damage will go. Now, watch as the market learns what we’ve known for years – that Nvidia’s throne was made of paper- and the storm has arrived.
TSMC’s uppercut punch
Just as Nvidia reels from the China export ban, TSMC has delivered a devastating second blow—a 30% price increase for U.S. FAB production that will eviscerate Nvidia’s already precarious margins.
The mathematics are brutal: Nvidia now faces catastrophic cost inflation from its sole supplier while simultaneously losing 25% of its data center revenue. Nvidia’s predicament reveals an uncomfortable truth: After years of dictating terms to the supply chain, the company will now be at the mercy of TSMC’s pricing power. With no alternative manufacturing options and dwindling revenue streams, Nvidia’s much-touted gross margins—already inflated by artificial scarcity and accounting shenanigans—face imminent collapse.
Legal Reckoning
As I revealed in “NVIDIA MANAGERS KNOW LAWSUITS ARE COMING AND ARE PREPARING TO DEFEND THEMSELVES”, company leadership has been preparing legal defenses for precisely this scenario. The reason is clear: The combination of evaporating China revenue and TSMC’s pricing power creates an earnings disaster that even Nvidia’s “aggressive” accounting cannot conceal.
Nvidia just issued its first profit warning—a scenario accurately predicted four months ago in “THE COUNTDOWN TO NVIDIA PROFIT WARNING”. More damningly, the U.S. export ban exposes Nvidia’s dangerous dependence on regulatory arbitrage, inviting both shareholder litigation and regulatory scrutiny, as I highlighted in the paragraph above.
Conclusion
Nvidia now faces its existential crisis:
- In the short term, expect violent earnings revisions as $7-10 billion in annual revenue disappears overnight while production costs skyrocket.
- In the long term, prepare for a fundamental valuation reset as markets finally recognize that Nvidia’s “AI dominance” was built on geopolitical arbitrage and supply chain manipulation rather than durable competitive advantages.
The only remaining question is how far the stock must fall before reaching equilibrium with reality—and whether Nvidia can survive the landing.
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