Piper Sandler Predicts NVIDIA to Face ~$10 Billion Annual Loss from AI-Related Capital Expenditure Slowdown and China Decoupling

This article does not constitute investment advice. The author holds no positions in any of the stocks discussed.

Emerging Optimism Amidst Wall Street Sentiment

After a prolonged period characterized by bleak market sentiment, a sense of optimism seems to be surfacing on Wall Street. This change is largely fueled by a robust earnings season and a resilient U. S.economy. However, one analyst from Piper Sandler offers a cautionary perspective, shedding light on potential challenges ahead, notably regarding NVIDIA.

NVIDIA’s Revenue Vulnerabilities Revealed

According to Piper Sandler’s analyst Harsh Kumar, a sensitivity analysis indicates that NVIDIA could face a significant decline in its data center revenues, with projections of a potential annual loss of $9.8 billion—representing 6.45% of this segment’s annual revenue. This worst-case scenario hinges on a drastic slowdown in capital expenditure (capex) and ongoing decoupling from China.

Impact on Earnings Per Share

The estimated revenue decrease could translate to an approximate impact of $0.40 on NVIDIA’s earnings per share (EPS).Following this analysis, Kumar sets a downside target for NVIDIA’s stock at $76.25 based on a 25 times earnings multiple. Conversely, in an optimistic scenario, the target price could rise to $126.75. As it stands, NVIDIA shares are trading just below $114.

Recent Developments Affecting NVIDIA

NVIDIA has also recently forecasted potential charges nearing $5.5 billion for its fiscal Q1 2026, which concluded on April 27. This figure arises from “inventory, purchase commitments, and related reserves”linked to its China-specific H20 GPU. Notably, the Trump administration communicated on April 9 that this GPU would be subject to an indefinite export licensing requirement moving forward. Additional integrated circuits (ICs) with comparable memory and interconnect bandwidth capabilities will also face similar restrictions.

Market Research Insights on Tariff Impacts

The cautionary analysis from Piper Sandler coincides with a recent study by TechInsights. This report delves into the current U. S.-China trade tensions, which have troubling implications for the semiconductor industry, particularly in the absence of significant conflict de-escalation.

Projected Market Growth and Decline

TechInsights estimates that under a global U. S.tariff rate of 10%, the semiconductor market could expand to $844 billion by 2026, growing from $777 billion this year—a compound annual growth rate of 8.6%.Yet, if the higher tariffs persist, exceeding 100% from both nations, the semiconductor market could contract by 10%, plunging to $696 billion in 2025 and dropping further to $557 billion in 2026. This marks a staggering decline of around 34% from the proposed $844 billion benchmark under the base case tariff scenario.

Current Market Performance of NVIDIA

As of today, NVIDIA shares are mostly stagnant, reflecting minimal movement within the trading session. Year-to-date, the stock has witnessed a decline nearing 17%.Investors and analysts alike will need to keep a close watch on these developments that could shape the semiconductor landscape going forward.

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