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Investing.com -- Nvidia may deliver strong July-quarter earnings but guide below Wall Street expectations for the October quarter due to uncertainty around China, according to KeyBanc Capital Markets.
The brokerage said in a note this week that it expects Nvidia’s outlook to “exclude direct revenue from China given pending license approvals and uncertainty on timing.”
KeyBanc added that if China sales were included, “we believe it would contribute an incremental $2-3B in revenues, given H20 and the RTX6000D (B40).”
Despite the U.S. lifting certain AI chip restrictions, analysts said Nvidia (NASDAQ:NVDA) is likely to take a cautious stance.
“Consistent with AMD’s recently reported results, we expect NVDA’s F3Q guidance to exclude direct contributions from the China market,” KeyBanc wrote.
The note also flagged “a potential 15% tax on AI exports and pressure from the China government for its AI providers to use domestic AI chips” as additional headwinds.
Even so, KeyBanc highlighted strong underlying drivers. “GPU supply grew 40% in F2Q and [is] projected to increase another 20% in F3Q” with the ramp of Nvidia’s Blackwell (B200).
Meanwhile, the newer Blackwell Ultra (B300) is set to begin shipping in the October quarter and could represent half of Blackwell shipments.
Rack production is also improving. “Given improving GB200 rack manufacturing yields at server ODMs, which we believe are approaching 85%, we believe rack shipments are on track to exit C4Q at 15K-17K racks and believe full-year GB rack shipments are tracking closer to 30K, vs. our prior est of 25K,” KeyBanc said.
KeyBanc reiterated its Overweight rating and lifted its price target for Nvidia to $215 from $190. Nvidia reports results on Aug. 27.