Shares of NVIDIA Corp. NVDA fell more than 1% on Thursday, as investors sought clarity over the potential impact of export restrictions to China on the chipmaker’s business.
On Tuesday, The Wall Street Journal reported that the United States government was planning restrictions on the export of chips and other critical technologies to China on the grounds of national security.
Nvidia’s stock price has dropped 3.5% since Monday, and it looks like it will end the week in the red for the second week in a row, which hasn’t happened since early April.
China Export Ban Has No Material Impact On Nvidia
Representing the bullish perspective, we have Hans Mosesmann from Rosenblatt Securities and Vivek Arya from Bank of America.
Rosenblatt Securities highlights that Nvidia previously estimated the potential impact of new restrictions on AI hardware going into China to be as high as $400 million per quarter in A100 sales. Nvidia addressed the issue by significantly reducing the capabilities of the A100, resulting in a new SKU called A800. The current sales of the A800 and the dumbed-down H800 being below $1.5 billion per year. Rosenblatt Securities suggests that even complete elimination of these sales would have minimal to no impact on Nvidia.
Hans Mosesmann reiterates his Buy rating and $600 price target for Nvidia.
According to Bank of America, Nvidia’s CFO mentioned that China represents 20%-25% of data center sales. Despite potential restrictions, the strong demand for accelerators from U.S. hyperscalers may not have immediate impacts on numbers. Bank of America suggests that reconfigured capacity could support A100/H100 sales, and in the longer term, the large AI accelerator market valued at over $100 billion could offset any potential restrictions in the Chinese market.
Bank of America holds a Buy rating on Nvidia with a price target of $500.
Read also: NVIDIA Stock, Analyst Ratings, Price Targets, Predictions
Why Nvidia Could Instead Come Under Pressure In The Near Term
According to Toshiya Hari, an analyst at Goldman Sachs, Nvidia’s revenue in China’s Data Center segment could be affected by the country’s relatively high margins (around 75-80%).
Given the stock’s impressive year-to-date performance, Goldman Sachs thinks the uncertainty caused by the WSJ article may have a short-term negative impact on NVDA shares. However, Goldman Sachs is confident that the stock will resume its consistent outperformance once the potential near-term EPS downside is understood and priced in.
Goldman Sachs maintains its Buy rating on NVDA and sees any fluctuations in the stock as an opportunity to increase positions due to its positive outlook on Nvidia’s competitive position in the quickly expanding AI semiconductor market.
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