Nvidia stock may see positive catalyst from China revenue, Mizuho says

Investing.com - Nvidia (NASDAQ:NVDA), a dominant force in the semiconductor industry with an impressive market capitalization of $4 trillion and revenue growth of 86% over the last twelve months, could potentially benefit from any upside in revenue from China, according to Mizuho (NYSE:MFG), which suggests this might serve as a positive catalyst for the stock. InvestingPro data shows the company maintains an excellent financial health score, with strong growth metrics across the board.

The investment firm notes that press reports indicate Nvidia CEO Jensen Huang plans to meet with high-level Chinese government officials next week at the International Supply Chain expo in Beijing. Simultaneously, Nvidia is reportedly developing a new scaled-down AI GPU chip designed to comply with stricter U.S. export controls. The company’s strong financial position, with liquid assets exceeding short-term obligations and moderate debt levels, provides flexibility for such strategic initiatives.

This new chip would likely be a variant of Nvidia’s current Blackwell RTX pro 6000, excluding high-bandwidth memory and NVLink, with potential release as early as September, according to Mizuho. The firm highlights that Nvidia is proceeding with this development despite recently taking a multi-billion-dollar charge related to H20 inventory after U.S. government restrictions blocked sales of that previously compliant chip to China.

Mizuho points out that Nvidia has stopped including any China AI-related revenue in their guidance. The firm questions why Nvidia believes it can develop a new China-compliant chip that wouldn’t face similar restrictions soon after launch.

The investment firm observes that most investors do not currently include Chinese AI revenue in their growth estimates for Nvidia, meaning any sustainable sales would represent upside. However, Mizuho notes the stock has not reacted significantly to these developments, suggesting investors remain cautious about revenue streams that could quickly disappear due to regulatory changes. According to InvestingPro analysis, the stock appears to be trading above its Fair Value, with a P/E ratio of 52, though strong growth metrics and excellent financial health scores suggest continued momentum. For deeper insights into Nvidia’s valuation and growth prospects, including 20+ additional ProTips and comprehensive analysis, check out the full Pro Research Report available on InvestingPro.

In other recent news, Nvidia has been the focus of several noteworthy developments. Goldman Sachs initiated coverage on Nvidia with a Buy rating, setting a price target of $185. The investment bank highlighted Nvidia’s product leadership and early AI monetization as key strengths. Meanwhile, Amazon (NASDAQ:AMZN) Web Services introduced a new cooling system tailored for Nvidia’s GPUs, enhancing energy efficiency in their AI infrastructure. Gorilla Technology Group announced a partnership with Nvidia, aiming to enhance its AI and cybersecurity solutions. This collaboration is expected to bolster Gorilla’s market position and product offerings. Lynx Equity addressed reports about potential U.S. restrictions on AI chip exports to Southeast Asia, suggesting minimal impact on Nvidia due to its limited revenue exposure in those regions. Lastly, CoreWeave became the first to deploy Nvidia’s GB300 NVL72 platform, marking a significant advancement in AI infrastructure and performance.

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