NVDA - Nvidia could see notable impact to revenue on new AI chip curb analysts believe

2023-06-28 08:45:49 ET

With the U.S. reportedly weighing new restrictions on artificial intelligence chip exports to China, Nvidia ( NASDAQ: NVDA ) could see as much as a 7% impact to revenue, some Wall Street analysts suggest.

Bank of America analyst Vivek Arya, who has a buy rating and a per-share price target of $500 on Nvida ( NVDA ), noted that 7% of the company's total revenue and 10% of data center sales could be impacted if additional licensing requirements were needed for A800 and H800 data center chips. Arya said the situation was "unwelcome" for Nvidia, but it was likely manageable, as the company revised specifications for the A100 and H100 chips and created the A800 and H800 series.

Arya added that the last time this occurred, Nvidia ( NVDA ) fell around 10% to 11% over the next few sessions, but it more than recovered those losses after it reported fiscal third-quarter results 10 weeks later.

According to recent filings, Nvidia ( NVDA ) generated $1.59B in revenue from China, including Hong Kong, in its fiscal first-quarter and $5.79B in fiscal 2023.

"While the China restriction news adds uncertainty and impacts near-term stock momentum, we believe strength from US hyperscale customers could soak up any additional product availability (though there could be charges to convert from China-specific A800/H800 to western A100/H100 version)," Arya added.

Over the long-run, Arya said that China is likely to account for less than 10% of the $100B or more total addressable market for AI-related accelerators.

Citi analyst Atif Malik maintained his buy rating on Nvidia ( NVDA ), though he noted that China AI demand has likely increased this year, due to generative AI adoption, from last year, when Nvidia ( NVDA ) quantified the chip export control as a $400M impact.

Malik believes that China will account for 5% to 10% of the $30B in total data center sales this year, but Nvidia should be able to manage. "Overall, we believe AI demand will exceed supply this year and Nvidia can move its chips around," Malik wrote.

Following the news, Nvidia ( NVDA ) shares fell in pre-market trading, as did competitors AMD ( AMD ), Broadcom ( AVGO ), Marvell Technology ( MRVL ) and Intel ( INTC ), along with other semiconductor stocks, including Micron ( MU ), which is scheduled to report quarterly results after the close of trading.

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