Nvidia Faces Export Restrictions Amid Declining Stock Value

Nvidia's stock struggles as U.S. export restrictions loom, threatening AI chip revenue. Analysts predict a significant drop in earnings, intensifying scrutiny on AI infrastructure spending.

Date: 25-04-2025

AI Rating: 4

Nvidia's Current Challenges: The report outlines a troubling scenario for Nvidia amid emerging competition and significant export restrictions. With the rise of DeepSeek, a Chinese start-up that leverages less advanced Nvidia technology, concerns about the high AI valuations arise. Analysts are cautious about Nvidia as the primary supplier of AI chips, especially in light of recent geopolitical developments.

Earnings Impact: Nvidia disclosed that it anticipates a $5.5 billion charge in its fiscal 2026 first quarter due to inventory and other commitments tied to its H20 chips, which face export restrictions. This revelation has led analysts to model zero revenue from the China market for the current fiscal year, resulting in lowered earnings projections.

Revenue Growth and Projected Declines: The report highlights that Nvidia generated approximately $17.1 billion in revenue from China in fiscal 2025. With the expectation of no revenue from this essential market this year and analysts predicting a 10% drop in earnings, the impact on Nvidia's financial health could be severe in the near term.

Profit Margins Under Pressure: The imposed license requirements and tariffs threaten Nvidia's profit margins on a range of products. Analysts suggest the negative implications from these export restrictions will start to affect operating margins, making it challenging to sustain financial performance.

Long-Term Potential: Despite the immediate challenges reflected in the current stock performance (down 24% year-to-date) and the consensus expectation of squeezed profits, there remains an optimistic outlook for Nvidia in the long term. The innovative capabilities showcased through its latest Blackwell chip and upcoming projects like the Vera Rubin chip can potentially revive interest and stability in its stock performance over a longer horizon.

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