nvidia (NVDA) It may have trouble selling a quality product to China again after a Wall Street Journal report claimed that the US Commerce Department is considering restricting the export of AI chips to its super rival.
This wouldn’t be the first time the government tightened control over the sale of chips to China. Remember, last September, the Biden administration implemented regulations that prevented the semiconductor giant from exporting A100 and H100 chips to Chinese customers without obtaining a license. At the time, the company estimated the potential impact could be close to $400 million each quarter. Nvidia found a way around the problem by designing less advanced chipsets, the A800 and H800, which lessened the impact somewhat.
Joseph Moore, an analyst at Morgan Stanley, notes that since the $400 million comments, Nvidia’s total data center business has nearly doubled, though he feels that over this period, China has underperformed overall growth. He opined that “the maximum impact would be $700 to $800 million, or less than 10% of data center revenue,” though he believes the actual impact “is likely to be smaller.”
It should also be remembered that since September, in the wake of the AI rush of AI, global demand for AI has increased dramatically and is “far from saturated with supply”. In fact, Moore cites conversations with US customers after word broke, who said they were “excited to take any product that might be repurposed from China.”
In the long run, the restrictions on China are clearly a “material determinant”. However, given that the limitations seem to always be slightly below the level of the A100, this result was to be expected regardless, due to the “rapid performance increases” of Nvidia’s high-end products, which will remain inaccessible to Chinese customers.
The five-star analyst summed up: “As a result, we will remain very confident in the near-term results even in the face of these mounting challenges. Certainly, concern could weigh on the stock in the short term, but overall order duration remains sharply up and to the right, and we don’t see This is a huge disturbance.”
Finally, Moore reiterated the Overweight (i.e. Buy) rating on NVDA stock to match the $500 price target. This indicates a potential growth of 22% for the stock in the coming year. (To watch Moore’s track record, click here)
Given the consensus breakdown, other analysts were also impressed. Based on 29 Buys, 2 Holds and 1 Sell, the word on the street is that NVDA is a Strong Buy. At $467.35, the average price target suggests an upside potential of about 14% from current levels. (be seen Nvidia Stock Outlook)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.