What's Going On With Nvidia Stock Wednesday?

Nvidia Corp NVDA remains engaged in multiple endeavors to boost its revenue stream as the U.S. intensifies its artificial intelligence technology embargo on China, a significant chip designer market. Nvidia CEO Jensen Huang is in Taiwan for a week.

The critical Apple Inc AAPL supplier expanded its partnership with another iPhone Maker partner, Hon Hai Precision Industry Co Ltd HNHPF, operating as Foxconn to develop a new class of data centers powering a wide range of applications, including the development of AI-powered electric vehicle and robotics platforms.

As per a fireside chat with Nvidia founder and CEO Jensen Huang and Foxconn Chairman and CEO Young Liu at Hon Hai Tech Day in Taipei, the collaboration starts with creating AI factories.

Meanwhile, Wall Street analysts estimate near-term to long-term impact on Nvidia due to the additional U.S. embargo on China.

KeyBanc analyst John Vinh sees this development as damaging long-term for NVDA, as it will ultimately be difficult to backfill China demand, which historically represents 20% - 25% of NVDA's data center revenues. 

Assuming a 20% impact on his $101 billion data center estimate for FY25, this would potentially present a ~$20 billion headwind and negatively impact his $25.62 EPS estimate by ~$5.

Vinh reiterated an Overweight rating with a price target of $750.

Bernstein analyst Stacy A. Rasgon reiterated Outperform with a price target of $675. 

The analyst acknowledges potential concerns about the Total Addressable Market (TAM) in China, exacerbated by the widening gap between legal sales limits in China and the rest of the world. 

However, he remains confident in the substantial size of the long-term TAM, regardless of China's participation.

The analyst projects FY24 revenue and EPS of $53.48 billion (vs. consensus $54.71 billion) and EPS of $10.59 (vs. consensus $10.79). Rasgon estimates FY25 revenue and EPS of $69.06 billion (vs. consensus $82.3 billion) and EPS of $14.12 (vs. consensus $17.06).

Raymond James analyst Srini Pajjuri's recent conversations in Asia highlighted strong demand from U.S. hyperscalers, with visibility extending into 1H23. 

As such, the analyst expects the near-term impact of new China restrictions to be modest and believes that any EPS impact on CY24 estimates will be less than 10% (The 20-25% China exposure includes other components such as Networking). 

The analyst believes the pullback offers an excellent opportunity to add to positions given AI and ML dominance, Software and Services opportunities, and secular growth in the Gaming and Auto markets.

The analyst projects FY24 revenue and EPS of $54.45 billion and EPS of $10.88. Pajjuri estimates FY25 revenue and EPS of $81.16 billion and EPS of $17.25. Pajjuri has a Strong Buy rating on the stock. 

Price Action: NVDA shares traded lower by 3.41% at $424.39 premarket on the last check Wednesday.