S&P 500 slips, but losses kept in check as Nvidia climbs ahead of results
Investing.com -- Nvidia shares declined last week despite reporting strong earnings, with Mizuho (NYSE:MFG) TMT specialist Jordan Klein pointing to concerns over potential US government action on chip exports to China as a key factor behind the sell-off.
According to Klein, headlines suggest that Singapore is investigating whether Nvidia (NASDAQ:NVDA) GPUs were illegally shipped to Malaysia and then into China, which is a “red herring.”
He noted that "anyone on buyside in Semis already knows NVDA chips are illegally getting into China via Asian ports of entry."
The bigger concern, he argued, is not the clampdown on Singapore and Malaysia, but rather the possibility that the US government could "ban every and all NVDA chip sales into China."
The uncertainty surrounding potential trade restrictions has made investors hesitant.
“Few want to buy ahead of any potential ban that in our estimation could remove $4-5B or up to $0.18 from FY26 estimates,” Klein said.
While some estimates put the potential revenue hit even higher, he stressed that the outcome would depend on broader US-China trade relations, including the threat of a 25% tariff on Chinese goods and potential retaliatory tariffs from China.
Despite the near-term risks, Klein remains positive on Nvidia, particularly at its current valuation.
“I remain positive NVDA at $125 and believe the 22x FY27 P/E discounts more lost revs to China to come,” Klein said.
Looking ahead, he sees stronger upside potential in the second half of the year, with Nvidia’s GTC conference in two weeks being a modest positive catalyst.
Klein expects another rally later in the year, particularly from the July quarter onward, as Nvidia’s new BW Ultra chip volumes ramp up and gross margins recover.