This article does not constitute investment advice. The author does not hold any positions in the stocks mentioned.
NVIDIA: Navigating Market Challenges
NVIDIA’s stock has experienced significant volatility since the launch of DeepSeek’s R1 model earlier this year, navigating through multiple challenges such as intensified AI apprehensions, ongoing global conflicts, and the complex dynamics of the US-China relationship. Despite these hurdles, NVIDIA is reportedly on track to address its last remaining negative catalysts this year, according to a recent analysis from Piper Sandler.
Analyst Insights on NVIDIA’s Performance
Analyst Harsh Kumar from Piper Sandler has reiterated an ‘Overweight’ rating for NVIDIA, maintaining a price target of $150 per share. However, he anticipates potential challenges ahead:
“All in all, we think that NVDA is poised to be flat to down into the print this week. We think that April quarter is poised for a miss in revenues largely from macro uncertainty and from the H20 ban.”
Impact of Licensing Requirements
Recently implemented licensing requirements by the Trump administration on NVIDIA’s H20 GPUs for the Chinese market are projected to generate a $5.5 billion inventory-related charge in the first quarter. Analysts from Susquehanna estimate that these restrictions have already resulted in a loss of $1 billion in sales during the final three weeks of NVIDIA’s April quarter, with cumulative losses expected to reach $3.5 billion per quarter for the remainder of the fiscal year.
Margins Under Pressure
A report by Wedbush indicates that NVIDIA may face a margin contraction of up to 11 percentage points, bringing it down to 67.7 percent in Q1 due to write-downs associated with H20. The company’s CEO, Jensen Huang, revealed that NVIDIA could potentially miss out on $15 billion in annual revenue from China, even as he foresees a burgeoning AI GPU market in China, projected to grow to $50 billion by 2026.
Future Product Developments
In response to the current restrictions, NVIDIA is developing a modified version of its Blackwell GPUs specifically tailored for the Chinese market. However, uncertainties in US-China relations could pose ongoing risks for the company.
Kumar expresses the view that NVIDIA’s new China-specific Blackwell GPU might only debut in the latter half of the quarter ending in July, and he notes that many of the factors impacting NVIDIA’s first-quarter performance are beyond the company’s control.
Optimism for Future Growth
Piper Sandler’s Harsh Kumar remains optimistic, asserting:
“Despite this, we see a strong back half of the year given HPC capex coming on strong coupled with macro forces improving driven by sovereign investments following the announcements of several large deals over recent weeks.”
Concluding his analysis, Kumar advises investors:
“We advise investors to weather the uncertainty and stay long the stock as this is likely largely the last wave of negative news for NVDA this year.”
Contrasting Views from Lynx Equity
In stark contrast to Piper Sandler’s cautious approach, Lynx Equity is notably bullish about NVIDIA’s potential, suggesting that the stock could be on the verge of reaching new highs. They state:
“After a couple of quarters of inline results, we think NVDA has the potential to provide upside to muted investor expectations.”
Additionally, Lynx Equity highlights the resurgence of CoWoS capacity at TSMC, which they believe signals a recovery in NVIDIA’s supply chain.
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