The Biden administration announced on Tuesday its intention to halt shipments of select artificial intelligence (AI) chips from prominent American companies, including Nvidia (NVDA), to China, triggering a nearly 5% drop in the stock value of the renowned chip manufacturer.
According to analysts at Citi, the probability of the US government granting export licenses to Nvidia is deemed “low,” leading to a revision of Citi’s 12-month price target for the company. The target was adjusted down to $575 from the previous estimate of $630.
Despite the signing of the proposed order, Nvidia remains optimistic regarding the immediate quarter, asserting that robust global demand for their products will mitigate any adverse effects. However, the company foresees potential implications beyond the current quarter due to the new licensing requirement. In an official statement, Nvidia acknowledged that this development “may impact the Company’s ability to complete development of products in a timely manner, support existing customers of covered products, or supply customers of covered products outside the impacted regions.”
To ensure compliance with the new regulations, Nvidia is contemplating relocating specific operations away from the affected countries. This strategic shift underscores the gravity of the announcement and its potential long-term consequences for Nvidia’s operations.
This development marks a critical juncture for Nvidia, as the company recently attained its 52-week high following a stellar sales report in late August. Presently, the stock has receded approximately 12% from that peak.
Despite the anticipated repercussions of the announced order, Citi maintains a Buy rating on Nvidia, underlining the company’s “secular AI growth which remains in early innings.” Wall Street analysts continue to express confidence in this AI industry titan. Nevertheless, it is evident that the proposed order has left an indelible mark on Nvidia’s future outlook.
As time unfolds, the full extent of the impact on the stock value of Nvidia remains uncertain. However, at present, the company is actively taking measures to ensure compliance with the new regulations while safeguarding its future prosperity.
Source: Yahoo Finance
