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Nvidia's Stock Poised for Recovery Despite Chip Export Limitations

Nvidia stock could thrive despite government chip export restrictions. Bank of America analyst maintains a 'buy' rating and sees future growth potential, as demand for AI remains high. Analysts anticipate 50% growth in revenue and earnings this year, presenting a compelling opportunity.

Date: 
AI Rating:   7

Nvidia's stock performance amid export restrictions

According to the report, Nvidia has been facing pressure from chip export restrictions to China, which has negatively affected its share price. However, Bank of America analyst Vivek Arya believes this presents a buying opportunity as the share price drops below $100. The analyst has lowered the price target from $160 to $150, implying a notable upside of 44% on recent share prices, while keeping a 'buy' recommendation.

Nvidia disclosed a projected financial hit of $5.5 billion due to U.S. licensing requirements for its H20 chip tailored for the Chinese market. Although this represents a significant near-term challenge, it underscores the broader adverse effects of the export restrictions on both revenue and earnings potential, as China constituted 13% of Nvidia’s revenue last year.

Despite these challenges, Nvidia is on track to maintain robust revenue growth, with expectations of more than 50% growth in revenue and earnings this year. This growth is bolstered by demand for its new Blackwell AI computing platform, which has already generated $11 billion in revenue and is anticipated to expand as tech companies increasingly implement it into their data centers. The forecast for profit margins is also favorable, with expectations for improvement in the second half of the year as production ramps up.

From an investment perspective, Nvidia currently trades at 22 times forward earnings estimates, which presents an attractive valuation for growth investors. The analyst sees that while there may be short-term dips, the current downturn appears to have already accounted for the revenue loss associated with the export restrictions, indicating potential upside once the market stabilizes.

Stocks:  NVDA