Nvidia (NVDA) could have a problem selling high-end products to China again after a Wall Street Journal report claimed the US Commerce Department is considering restricting the export of AI chips to its superpower rival.
It wouldn’t be the first time the government has tightened control over the sale of chips to China. Recall that 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 around $400 million per quarter. Nvidia found a way around the problem by designing less advanced chips, the A800 and H800, which somewhat lessened the impact.
Morgan Stanley analyst Joseph Moore notes that since the $400 million comments, Nvidia’s overall data center business has “roughly doubled”, although he feels that over the period, China underperformed overall growth. “So the maximum impact would be $700 million to $800 million, or less than 10% of data center revenue,” he said, though he thinks the actual impact would be “probably more.” weak”.
It’s also worth remembering that since September, in the wake of the AI Gold Rush, global demand for AI has increased dramatically and is “much further from being sated by supply.” In fact, Moore cites conversations with US customers after the news broke, who said they were “happy to take any product that could be reused in China.”
In the long term, it is clear that the constraints imposed on China are a “material limiter”. However, since the restrictions seem to be permanently set slightly below the A100 level, this result was still expected, due to the “rapid performance increases” of Nvidia’s high-end products, which would remain inaccessible to Chinese customers.
“As a result,” the 5-star analyst summed up, “we would remain fairly confident in near-term results, even in the face of these additional challenges. demand remains strongly up and to the right, and we don’t see this as a major disruption.
All told, Moore reiterated an overweight (i.e. buy) rating on NVDA stock to go along with a price target of $500. This indicates potential growth of around 22% for the stock over the coming year. (To see Moore’s track record, Click here)
Looking at the consensus breakdown, other analysts were also impressed. Based on 29 purchases, 2 reservations, and a single sale, the word on the street is that NVDA is a strong buy. At $467.35, the mid-price target implies around 14% upside potential from current levels. (See Nvidia Stock Prediction)
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Disclaimer: The opinions expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.