Two bears remain on Nvidia after its strong results. What they are worried about

Despite Nvidia's strong earnings, D.A. Davidson and HSBC are maintaining neutral ratings on the stock, citing concerns about the impact of Chinese export restrictions and potential supply chain mismatches. D.A. Davidson raised its price target to $135, while HSBC increased its target to $125, implying limited or negative stock performance; D.A. Davidson believes the street is underestimating China's contribution to Nvidia's revenue and that the export restriction is a major overhang, potentially handing the Chinese market to competitors like Huawei, while HSBC is concerned about supply chain issues even with the Blackwell chip ramp-up.

Analysis

Nvidia reported strong quarterly results, with adjusted earnings per share of 96 cents on $44.06 billion in revenue, surpassing LSEG analyst estimates of 93 cents per share and $43.31 billion in revenue, leading to an initial stock increase of over 5%. The company also issued robust guidance, forecasting approximately $45 billion in sales for the current quarter, though it noted that this figure would have been about $8 billion higher absent export restrictions on its H20 chips to China. Despite this strong performance and a largely bullish consensus (57 out of 64 analysts rating Nvidia a buy), D.A. Davidson and HSBC reiterated neutral and hold ratings, respectively. D.A. Davidson raised its price target to $135, implying no significant upside from Wednesday's close, citing concerns that the market under-accounts for China's contribution to Nvidia's revenue and that current U.S. policy might cede the estimated $50 billion Chinese total addressable market to local competitors like Huawei. HSBC, while increasing its target to $125 (implying a potential 7% downside), highlighted risks of ongoing supply chain mismatches between upstream AI GPU shipments and downstream server rack shipments, which could persist into the second half of fiscal year 2026 and potentially slow GPU order momentum, even with the ramp-up of its Blackwell chips.

Key Decisions for Investors

• Investors should weigh Nvidia's strong earnings beat and positive revenue guidance against specific geopolitical risks, particularly the impact of U.S. export restrictions on access to the significant Chinese market and the potential rise of local competitors.
• Monitor closely any further developments regarding U.S.-China trade policy concerning advanced chip exports, as this remains a key overhang identified by analysts.
• Evaluate potential supply chain challenges, including mismatches in AI GPU and server rack shipments, which could impact the realization of growth expectations from new products like Blackwell, despite the current positive momentum.
• Consider the valuation implications of the cautious price targets from D.A. Davidson ($135) and HSBC ($125), which suggest limited near-term upside or potential downside, contrasting with the broader bullish sentiment.