Nvidia (NASDAQ ) shares have continued to fall in response to the US government’s decision to restrict the export of advanced chips to China.
Shares fell 1.5% in early trading Wednesday after previously losing 4.7% on Tuesday.
In a regulatory filing, Nvidia highlighted the potential for export controls to impact its ability to complete product development in a timely manner. Additionally, these controls could potentially disrupt support to existing customers of the affected products and their supply to regions affected by these restrictions, the company said.
In response to these challenges, Nvidia may need to reevaluate and possibly relocate certain operational aspects of one or more countries. On a more positive note, these challenges are not expected to have an immediate financial impact.
The United States has imposed restrictions on Nvidia’s A800 and H800 series, designed specifically for the Chinese market. Recent months have seen an increase in orders from major Chinese customers, signifying a strategic move to stockpile 800 series chips in anticipation of these restrictions.
In response to yesterday’s filing and development, analysts at Citi and Morgan Stanley lowered their price targets for Nvidia stock.
“We are de-risking our FY25/26 estimates and assuming a low probability of the US government granting export licenses. “We believe that reaching the new performance density thresholds will make it difficult for NVIDIA to sell in China, as it will require more than the networking modifications it made to previous A800/H800 products in China,” Citi analysts wrote in a note to the customer.
As a result, analysts lowered their price target by $55 per share to $575.
Still, they remain bullish on Nvidia stock due to the “secular growth of ai that, in our view, remains in the early stages.”
Similarly, analysts at Morgan Stanley lowered the price target to between $30 and $600 per share as export controls are “more draconian than our expectations.”
“We expected a tightening of specifications, but broad licensing requirements in the gray area create more material uncertainty for a region that generates 20-25% of demand,” they wrote.
“This is a major setback, but the business is likely to continue to exceed expectations despite this, and NVIDIA remains our best option in the semi-finals.”
