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On Tuesday, NVIDIA shares faced a downturn, closing 6% lower at $105 after the company disclosed a new U.S. government licensing requirement for its H20 chips export to China. The announcement, made following Tuesday’s market close, revealed that as of April 9, these chips, which are adapted versions of the H100 to comply with 2022 export restrictions from the Biden administration, now face additional export controls. According to InvestingPro data, NVIDIA’s stock has shown significant volatility, with a beta of 1.96, though the company maintains a perfect Piotroski Score of 9, indicating strong financial stability.
The affected H20 chips have been in high demand from major Chinese internet firms such as Tencent (HK:0700), Bytedance, and Alibaba (NYSE:BABA), with reported orders of $16 billion in the first quarter. This new regulation is expected to lead to NVIDIA incurring up to $5.5 billion in charges related to inventory, purchase commitments, and reserves for the H20 chips. This development is anticipated to significantly impact NVIDIA’s gross margins in the first quarter, equivalent to a 13-percentage-point reduction, and will also affect the company’s revenue growth for the fiscal year. Despite these challenges, NVIDIA maintains robust financials with a current ratio of 4.44 and a low debt-to-equity ratio of 0.13, suggesting strong liquidity to weather near-term headwinds.
Despite the challenges, William Blair analyst Sebastien Naji reiterated an Outperform rating on NVIDIA (NASDAQ:NVDA), acknowledging the company’s reduced exposure to the Chinese market over the past two years and its standing as a leader in AI infrastructure. The analyst noted that while the current situation adds to the existing concerns surrounding NVIDIA, the company’s technological edge and the demand for its next-generation Blackwell GPUs should not be overlooked. InvestingPro analysis shows impressive revenue growth of 114.2% over the last twelve months, with analysts expecting continued strong growth ahead. Get access to 15+ additional exclusive ProTips and comprehensive financial metrics with an InvestingPro subscription.
NVIDIA’s first quarter is set to conclude on April 27, with the earnings call scheduled for May 28. The company’s stock is currently trading at a price-to-earnings multiple of 24 times and 19 times William Blair’s unchanged calendar 2025 and 2026 estimates, respectively.
The report also highlighted potential risks for NVIDIA, including its exposure to the Chinese market, competition, the cyclical nature of the semiconductor industry, supply chain constraints, and reliance on CEO Jensen Huang’s leadership.
In other recent news, NVIDIA has been impacted by new U.S. government export restrictions that require a license for exporting its H20 integrated circuits to China, including Hong Kong and Macau. This regulatory change is expected to result in significant financial charges, with NVIDIA estimating up to $5.5 billion in costs related to inventory and purchase commitments for the first quarter of fiscal year 2026. Despite these challenges, NVIDIA continues to advance its product offerings with the launch of the GeForce RTX 5060 GPUs, which feature advanced AI technologies and are designed for both gamers and creators. The new GPUs are based on the Blackwell architecture and include DLSS 4 technology for enhanced performance and image quality.
Analyst firms have responded to these developments with varied outlooks. Raymond (NSE:RYMD) James maintained a Strong Buy rating on NVIDIA but lowered its price target to $150, acknowledging the potential impact of the export restrictions. DA Davidson reiterated a Neutral rating, citing the uncertainty surrounding the new regulations and their effect on NVIDIA’s financials. Meanwhile, Evercore ISI maintained an Outperform rating, adjusting its revenue and earnings estimates downward but suggesting potential for a future rebound based on historical patterns.
NVIDIA’s recent announcements also highlight the company’s ongoing commitment to AI infrastructure, with plans for a $500 billion investment over the next four years. However, this commitment could be re-evaluated in light of the new export rules. As the company navigates these regulatory and financial challenges, investors are closely monitoring the situation for further updates and guidance from NVIDIA.
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