Nvidia forecast third-quarter revenue above Wall Street estimates Wednesday, helped by robust demand for its artificial intelligence chips from cloud providers expanding infrastructure to power generative AI technology.

The AI market bellwether expects revenue of $54 billion, plus or minus 2%, in the third quarter, compared with analysts' average estimate of $53.14 billion, according to data compiled by LSEG. The company said it has not assumed any shipments of its H20 chips to China in the outlook.

Shares of the world's most valuable firm fell 5% in extended trading. Nvidia shares have gained more than a third so far in 2025, outpacing the benchmark S&P 500 Index's year-to-date rise of nearly 10%.

Still, demand has surged for Nvidia's advanced chips that can speedily process the large amounts of data used by generative AI applications as businesses race each other to dominate the new technology. Big Tech companies including Meta Platforms and Microsoft have been spending liberally to support their AI ambitions, and Nvidia is the biggest beneficiary, with a significant chunk of this spending funneled toward its chips.

Enthusiasm for AI stocks, centered around Nvidia as Wall Street engaged in picks-and-shovels trading, has been the dominating force behind the rally of the S&P 500 Index over the last two years.

But the company has been caught in the crossfire of the trade war between Washington and Beijing, as the world's two largest economies claw for dominance of generative AI technology.

In an unprecedented deal with U.S. President Donald Trump, Nvidia has agreed to pay the government 15% of some of its revenue in China in exchange for a reversal of restrictions that curbed sales of its H20 chips to China. But Beijing has cautioned domestic companies about imports and sources said that Nvidia has halted production of H20 chips.

Nvidia had in May expected the curbs to shave off $8 billion in sales from the July quarter. The company reported revenue of $46.74 billion for the second quarter, beating estimates of $46.06 billion.

It said there were no H20 sales to China-based customers in the second quarter.