Trump signals tariff plans, Fed chair candidates, China deal progress
Investing.com - Nvidia is still the best-positioned chipmaker to benefit from ongoing enthusiasm around artificial intelligence, even as the firm grapples with recent concerns around its Chinese business, analysts at Bank of America said in a note to clients on Thursday.
Last week, the world’s most valuable semiconductor firm unveiled quarterly sales that topped expectations thanks to customers stocking up on its AI chips prior to the implementation of new U.S. restrictions on exports of cutting-edge processors to China.
The U.S. has placed strict rules around the export of these chips to China, as Washington hopes to limit Beijing’s access to -- and harnessing of -- AI technology.
For Nvidia (NASDAQ:NVDA), this has particularly meant restrictions on the sale of its H20 chips to China, previously the only AI processor it was legally allowed to export to the country.
Some $2.5 billion in H20 sales were lost in the first quarter, Nvidia flagged, while CFO Collette Kress said data center revenue in China slipped. Meanwhile, the California-based business noted that the curbs would lop some $8 million off sales in the current quarter, leading it to announce weaker-than-anticipated financial guidance.
Still, the analysts at BofA said that, following an investor dinner with Kress and other Nvidia executives, China is now "fully de-risked" for the company, "with no China-related sales in their current data center forecasts".
"While there may be reports of follow-on products for the $50 billion AI total addressable China market, any sales from here are incremental," the brokerage added. According to Reuters, Nvidia has been preparing a variant of its Blackwell chips for China.
U.S. President Donald Trump’s decision to lift a so-called AI diffusion rule that would have limited the global flows of American AI chips also opens access to opportunities in other countries for Nvidia, the analysts argued. Last month, Nvidia inked a series of deals in the Middle East, including one pertaining to a 10-square mile data center in the United Arab Emirates. Other agreements have also been signed in Saudi Arabia.
The BofA analysts maintained their "buy" rating of Nvidia’s stock, which has risen by 2.6% so far this year despite deep equity market ructions. The strategists also named the firm as a "top pick" in the semiconductor sector, giving it a price target of $180. On Wednesday, Nvidia shares closed at $141.92.