Nvidia’s Strategic Pivot Amidst Escalating China Tensions

Nvidia shares are attempting to recover following a significant decline in the previous session. The market’s focus is split between escalating geopolitical friction over AI chip exports to China and the company’s aggressive strategic moves to dominate the AI inference market through acquisitions and investments. This combination of external pressure and internal expansion is shaping the chipmaker’s medium-term outlook.

A Deepening Focus on AI Inference

Beyond immediate political headwinds, Nvidia is aggressively fortifying its position in the AI inference sector—the phase where trained AI models are deployed for everyday use. The company confirmed a $150 million investment in Baseten, a provider of inference infrastructure, on January 21. This funding round values the startup at approximately $5 billion.

This move follows the substantial $20 billion transaction with Groq, finalized in late December 2025. Officially structured as a “non-exclusive licensing agreement” to sidestep antitrust scrutiny, the deal functioned in practice as a major asset acquisition. Nvidia secured Groq’s core intellectual property and approximately 90% of its development staff, including founder Jonathan Ross, while Groq maintained its existence as a standalone entity. This clever structure allowed Nvidia to obtain crucial low-latency technology without triggering a full regulatory halt.

The investment in Baseten reinforces this strategic direction: Nvidia is systematically building a technology stack designed to establish its GPUs as the standard platform for both AI training and inference.

The “Reverse Trade War” Over H200 Chips

A central concern for investors is the emerging “reverse trade war” surrounding Nvidia’s H200 AI chips. While the U.S. government recently approved the export of these processors, reports from January 20 and 21 confirm that Chinese customs authorities are now blocking the shipments. Suppliers have subsequently suspended their production lines.

In an effort to reopen this critical sales channel, CEO Jensen Huang plans a trip to Beijing before the Chinese New Year. The visit is seen as a crucial attempt to prevent a permanent shift in demand toward local competitors like Huawei. Failure could result in a material decline in Nvidia’s China business.

This blockade signals a shift in the dynamics of the tech conflict. Whereas U.S. export restrictions have historically constrained Nvidia’s growth, Beijing is now utilizing its own leverage to mandate the use of domestic chips—even when Washington permits exports.

Should investors sell immediately? Or is it worth buying Nvidia?

Valuation Context and Market Positioning

The recent share price correction, which has brought the stock roughly 16% below its October 2025 peak, has compressed Nvidia’s valuation to about 24 times expected earnings for fiscal year 2027. Historically, this represents a discount for a firm commanding over 90% market share in AI training.

The aggressive push into inference, powered by the Groq and Baseten deals, reveals management’s market assessment: the industry’s center of gravity is gradually shifting from building AI models (training) to deploying them in live operations (inference). Nvidia is proactively acquiring efficient technologies to consolidate both phases on its own hardware.

Analysts at RBC Capital Markets highlighted this strategy in an initiation report dated January 15. They assigned an “Outperform” rating with a $240 price target, citing an order backlog now exceeding $500 billion and a growing software ecosystem expected to mitigate short-term share price volatility.

Technical Levels and Upcoming Catalysts

From a chart perspective, the stock is currently defending a key support zone around $176. A sustained break below this level could, according to market observers, open a path toward $152. On the upside, the area around $200 is viewed as a significant resistance hurdle.

In the near term, all eyes are on Jensen Huang’s planned China trip. A resolution that allows H200 chips to clear customs could provide the catalyst for a swift move toward the $200 mark. Conversely, if Beijing maintains its blockade, noticeable downward revisions to Asia revenue forecasts are likely.

The next major fundamental catalyst will be the fourth-quarter earnings report on February 25, 2026. This update is expected to provide details on how the Groq assets will be integrated into the Blackwell roadmap and outline Nvidia’s expectations for the expansion of its inference business.