Analyst resets Nvidia stock price target after CEO slams U.S. chip policy

Nvidia reported strong fiscal first-quarter earnings, beating expectations with adjusted EPS of 96 cents on $44.06 billion in revenue, driven by robust data-center growth, although results were impacted by U.S. export restrictions to China, which CEO Jensen Huang stated has effectively closed the $50 billion Chinese AI chip market to U.S. firms; Bank of America raised its NVDA price target to $180 from $160, citing positive upsides including Blackwell production, China derisking, and margin recovery, while acknowledging execution and geopolitical risks.

Analysis

Nvidia (NVDA) delivered strong fiscal first-quarter results, reporting adjusted earnings of 96 cents per share on $44.06 billion in revenue, surpassing Wall Street's expectations of 93 cents and $43.31 billion, respectively, largely driven by robust demand for its data-center AI infrastructure. This performance occurred despite significant headwinds from U.S. export policies targeting China, which CEO Jensen Huang stated have "effectively closed" the $50 billion Chinese AI chip market to U.S. firms. The restrictions, particularly the export license requirement for the H20 processor, resulted in a $4.5 billion charge for Nvidia in the quarter and an estimated $2.5 billion in forgone revenue, with the H20 ban halting its Hopper data-center operations in China; the company further noted its July quarter revenue guidance of $45 billion (plus or minus 2%) would have been approximately $8 billion higher absent these curbs. Consequently, gross margin was 61%, suppressed from a potential 71.3% without the H20 inventory charge. While China constituted 13% of Nvidia's sales in the past fiscal year, and other firms like Cadence (CDNS) and Synopsys (SNPS) also faced pressure from U.S. restrictions, Nvidia's stock has demonstrated resilience, rising 3.25% post-earnings and over 47% since its April low, reflecting confidence in its broader growth trajectory. Bank of America raised its NVDA price target to $180 from $160, citing the full production of Blackwell racks, a de-risked China outlook, and an anticipated gross margin recovery to the mid-70s by year-end as key positives, while also acknowledging execution risks from an accelerated annual product cycle and persistent geopolitical uncertainties. Nvidia aims to mitigate the China impact by launching a cheaper, compliant AI chip for that market, with production slated for as early as September.

Key Decisions for Investors

• Investors should weigh Nvidia's formidable core AI infrastructure growth and strong financial performance against the persistent geopolitical risks and direct revenue impact from U.S. export controls on China.
• Closely monitor key execution milestones, including the ramp-up of Blackwell production and the trajectory of gross margin recovery towards the mid-70s, as these are critical for validating the stock's current valuation and optimistic analyst targets.
• Evaluate the market adoption and revenue contribution of Nvidia's planned new AI chip for China as a crucial factor in mitigating the financial impact of current export restrictions and assessing the company's adaptability in a challenging regulatory environment.