- Wednesday, October 16, 2024
Analyst John Vinh cuts price target on Nvidia, citing impact of new export restrictions
Nvidia (ticker: NVDA) is expected to face the consequences of stricter limitations on exports to China, leading to potential stock pressure, according to KeyBanc Capital Markets.
Lowered Price Target and Earnings Forecast
Analyst John Vinh has reduced his price target on Nvidia to $650 from $750, while retaining an Overweight rating on the stock. Following the same trend, Vinh has also adjusted his earnings estimate for fiscal year 2025, lowering it to $20.84 per share from $25.62. Additionally, his revenue forecast for the same period has been revised to $96.8 billion from $116 billion.
Impact of China Restrictions
Vinh emphasizes the impact of incremental China restrictions on Nvidia's performance, citing China's historical contribution of 20-25% to the company's data center revenues. In his research note, he states that these restrictions are expected to create headwinds for Nvidia. Moreover, in a separate note, Vinh expresses concerns about the challenge of replacing China's demand in the long run.
Wall Street Consensus
Similar sentiments have been echoed by other analysts on Wall Street following recent news of the United States tightening its restrictions on chip exports to China for artificial intelligence purposes. The new regulations will impose a licensing requirement for high-tech chip exports and may even lead to a complete ban if not complied with.
Potential Impacts Highlighted by Nvidia
In response to the new regulations, Nvidia has informed the Securities and Exchange Commission that compliance with the licensing requirement could delay the company's product development timelines. It may also hinder its ability to support existing customers outside of the affected regions and potentially necessitate operational adjustments.
Although the future impact on Nvidia remains uncertain, it is clear that the company will need to navigate these restrictions and find alternatives to mitigate potential losses.
The Impact of Stricter Restrictions on Nvidia's Products
The recently announced stricter restrictions on Nvidia's products in China have sparked concerns among analysts regarding the long-term implications. However, Vinh, an industry expert, believes that these measures will have minimal effects in the near term. In fact, he expects Chinese customers to rush and purchase as much as possible before the new controls take effect on November 16. Nvidia, in its filing, shares a similar sentiment, stating that the high demand for its products globally will likely outweigh any potential negative consequences from the additional restrictions in the foreseeable future.
Despite Vinh's relatively positive outlook, he is not alone in expressing worry about the long-term impact of these restrictions. Morgan Stanley analyst Joseph Moore adjusted his price target for Nvidia to $600 from $630, while maintaining an Overweight rating on the stock. In a research note, Moore states that while export controls were expected, the severity of these measures exceeded expectations.
Citi analyst Atif Malik also weighed in on the matter, stating in a research note that he sees a low likelihood of the U.S. government granting export licenses and is adjusting his FY25/26 estimates accordingly. Malik has lowered his price target for Nvidia to $575 from $630 but maintained a Buy rating on the stock.
However, despite concerns from analysts, the overall market for AI chips remains robust. Taiwan Semiconductor Manufacturing (TSM), the main manufacturer of AI chips for Nvidia, reported strong third-quarter earnings and emphasized the growing demand for AI. TSM is actively working to increase its capacity to meet this rising demand.
Although Nvidia's stock experienced a 0.6% dip on Friday, it has witnessed an impressive 187% surge throughout this year.
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