Nvidia stock selloff presents a ‘buying opportunity,’ analysts say as they shrug off China fears
Published: June 28, 2023 at 8:57 a.m. ET
By Emily Bary
Potential new export restrictions on sales to China shouldn’t be a ‘big deal’ for Nvidia, according to Evercore
Shares of Nvidia Corp. and Advanced Micro Devices Inc. were among chip names falling in Wednesday’s premarket action amid a report saying that the U.S. government is considering restricting sales of artificial-intelligence chips to China, but there’s still plenty of uncertainty over how dynamics will play out.
“There are zero details set in stone today as a decision is still being mulled over and chipmakers are reportedly pushing back to ease restrictions — so it is clearly too early to have a definitive view of the impact one way or another,” Evercore ISI’s C.J. Muse wrote in a note to clients.
See more: Nvidia and AMD shares fall on report of new U.S. ban on AI chip exports to China
The Commerce Department has yet to finalize new export restrictions beyond the ones announced last year, and the agency didn’t immediately respond to a MarketWatch request for comment on its plans or the Wall Street Journal report detailing potential new measures.
But Muse still took a stab at gauging the potential impact for Nvidia NVDA , concluding that it was unlikely additional restrictive activity “derails the bull thesis” for the high-flying chipmaker.
“Overall, with a more targeted approach to restrictions and NVDA’s proven agility, we do not expect this to be a big deal for NVDA,” Muse wrote.
He noted that data-center sales in domestic China account for perhaps 10% to 15% of revenue but that the company could find ways to shift around its offerings to comply with potential restrictions on the exports of certain chips.
That’s what the company did when the U.S. revealed new license requirements for Nvidia’s A100 product in Russia and China last year.
Muse rated Nvidia shares at outperform with a $550 target price.
Nvidia’s stock was down 3.5% in premarket action Wednesday, while AMD’s AMD
was off 3.3%.
Don’t miss: Nvidia CEO warns of ‘enormous damage’ if China chip war escalates
Wells Fargo’s Aaron Rakers also noted Nvidia’s past ability to stay compliant with restrictions while still generating sales.
“NVIDIA had commenced the sales of their A800 chips at lower performance levels vs. the restricted A100 GPUs in early-November 2022,” he wrote Tuesday. “The A800 is virtually identical to the A100 except for the NVLink interconnect bus is limited to 400 GB/s inter-chip connection bandwidth to avoid the export restriction on accelerators with +600 GB/s bandwidth.”
As for AMD, he flagged that the company got about 22% of its revenue from China in 2022, but “this likely includes very minimal data-center GPU contributions.”
Mark Lipacis of Jefferies also wasn’t sweating potential impacts to Nvidia.
“Should the US tighten restrictions on AI chips further, we do not believe that demand/shipments to China will disappear,” he wrote, plus any big drop in China shipment due to additional restrictions would likely “get absorbed by demand from non-China hyperscalers and enterprises.”
See also: Nvidia board member sells $51 million in stock, joining a pair of other long-timers in unloading shares
He said that the pullback in Nvidia shares could present a “particular buying opportunity” for investors.
“We continue to believe the computing industry is experiencing a once-in-a-15-year tectonic shift to a parallel processing/IoT computing era that will be 10x the previous era, and that NVDA will be one of the main beneficiaries,” he wrote, while maintaining a buy rating and $500 target price.
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