Due to worries that the recent restrictions on chip exports to China are “more disruptive” than expected, Morgan Stanley analysts reduced their revenue forecasts for Nvidia (NVDA) on Wednesday.
After the U.S. government informed Nvidia that it would need a federal export license to sell its H20 chips to China, experts predicted that the company’s data center sales would drop by 8% to 9% over the course of the following two quarters. One The H20, which was designed to satisfy export restrictions for the Chinese market, is not as powerful as Nvidia’s most recent processors.
According to Morgan Stanley, Nvidia said on Tuesday that it anticipates incurring a $5.5 billion charge in its fiscal first quarter due to the government’s decision, which “suggests that the company is not optimistic about being granted licenses.” According to the analysts, between 12% and 13% of Nvidia’s data center revenue in April came from the H20 processor.
Nvidia’s stock fell about 7% to finish at $104.49 on Wednesday, sending other chip and tech firms down as investors feared that tighter export controls would have far-reaching effects. (Go here to see Investopedia’s live coverage of the current market activity.)
Lawmakers Question Nvidia About DeepSeek’s Chips
The move coincides with heightened governmental investigation of Nvidia’s cooperation with Chinese AI company DeepSeek. Concerned that DeepSeek developed its AI models using limited Nvidia processors, which the Chinese company claims can match American competitors at a fraction of the price, the House Select Committee on the Chinese Communist Party wrote to Nvidia on Wednesday. 2.
“The U.S. government instructs American businesses on what they can sell and where—we follow the government’s directions to the letter,” Nvidia said to Investopedia.
Wedbush analysts said on Wednesday that Nvidia’s superiority in AI gives it a “big chip on the table for Trump,” and that DeepSeek’s quick ascent “makes this game of high stakes poker that much more tense.”
Analysts Continue to Have Hope for Nvidia Stock
Morgan Stanley, which kept its price target at $162, said that Nvidia’s stock is still a “top pick” despite worries about the new export limitations, citing the chipmaker’s ability to profit from the rising demand for AI gear.
In a similar vein, Bank of America reaffirmed its $160 target, describing the chipmaker’s stock as “compelling” due to the robust demand for Nvidia products worldwide. 4 UBS and Jefferies were even more optimistic, both reiterating their $185.56 goal.
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