Nvidia (NASADQ:NVDA) could once again struggle to sell high-end products to China after a Wall Street Journal report claimed that the US Department of Commerce is considering restricting AI chip exports to its superpower rival.
It wouldn’t be the first time the government has tightened control over chip sales to China. Recall that last September, the Biden administration issued 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 at about $400 million per quarter. Nvidia found a way around the problem by developing less advanced chips, the A800 and H800, that mitigated the effects somewhat.
Morgan Stanley analyst Joseph Moore notes that Nvidia’s overall data center business has “roughly doubled” since the $400 million comments, though he feels China has lagged overall growth over the period. “So the maximum impact would be $700 million to $800 million, or less than 10% of data center revenue,” he said, although he believes the actual impact would be “probably less.”
It is also worth remembering that global demand for AI has increased significantly since September in the wake of the AI gold rush and is “far from being matched by supply”. In fact, Moore cites conversations with US customers after the news broke, who said they were “excited to accept any product from China that might find a different use.”
In the long run, it is clear that restrictions on China are a “material constraint”. However, considering that the limitations are consistently slightly below the level of the A100, this result was still to be 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 summarized, “even in the face of these mounting challenges, we would be reasonably confident about near-term results.” Certainly, concerns could weigh on the stock in the short-term, but aggregate demand is still trending strongly higher and to the right, and we see no major disturbance in it.”
All in all, Moore reiterated the NVDA’s Overweight (ie, Buy) rating, which comes with a $500 price target. This points to a potential growth of around 22% for the stock in the coming year. (To see Moore’s track record, Click here)
Other analysts were also impressed with the consensus breakdown. Based on 30 buys and 2 breakpoints, NVDA is a strong buy, word on the street is. At $467.35, the average price target implies about 14% upside from current levels. (See Nvidia Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.