Nvidia
will eventually start to feel the impact of stricter restrictions on exports to China, and that will put pressure on the stock, KeyBanc Capital Markets says.
Analyst John Vinh cut his price target on
Nvidia
(ticker: NVDA) to $650 from $750 but maintained his Overweight rating on the stock. Vinh also lowered his fiscal 2025 earnings estimate for the company to $20.84 a share from $25.62, while cutting his forecast for 2025 revenue to $96.8 billion from $116 billion.
“We are lowering our FY25 estimates to reflect headwinds from incremental China restrictions,” Vinh wrote in a research note Thursday. “Historically, China has accounted for 20-25% of data center revenues.” He said in a separate note on Tuesday that he viewed the new restrictions as “negative long-term for Nvidia, as it will ultimately be difficult to backfill China demand.”
Vinh’s analysis, and similar calls from others on Wall Street, follow news Tuesday that the U.S. would tighten its restrictions on exports to China of chips that can be used for artificial intelligence. Exports of high-tech chips will be banned without a license, while exports of semiconductors below that threshold will require government notification that could be followed by a ban.
Nvidia said in a filing with the Securities and Exchange Commission Tuesday that the licensing requirement may affect the company’s ability to complete development of products in a timely manner, support existing customers outside the affected regions, and may require the company to move some of its operations.
Vinh said, though, that he believes the effects of the stricter restrictions will be minimal in the near term, and that he expects Chinese customers to buy as much possible ahead of Nov 16, when the new controls go into effect. Nvidia said in its filing that because of the high demand for its products globally, it doesn’t expect the additional restrictions will have a meaningful effect on results in the near term.
Vinh isn’t the only analyst to have concerns over the long term.
Morgan Stanley
analyst Joseph Moore lowered his price target on Nvidia to $600 from $630 on Wednesday, but maintained his Overweight rating on the stock. The analyst wrote in a research note that “while export controls have been widely expected given recent press reports, this is at the more draconian end of expectations, in our view.”
Citi
analyst Atif Malik wrote in a research note earlier this week that he was “de-risking our FY25/26 estimates and assume low likelihood of U.S. government granting export licenses.” Malik lowered his price target to $575 from $630 and maintained his Buy rating on the stock.
Still, the overall market for for AI chips is robust. Management at
Taiwan Semiconductor Manufacturing
(TSM), the main manufacturer of AI chips for Nvidia, said after reporting third-quarter earnings Thursday that “AI demand continues to grow stronger and stronger,” and that the company is working hard to increase capacity to meet demand.
Shares of Nvidia were down 0.6% Friday. The stock has surged 187% this year.
Write to Angela Palumbo at [email protected]
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