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Summary
- New export restrictions imposed by the Trump Administration will effectively preclude Nvidia Corporation (and smaller competitor AMD) from selling advanced AI chips to China.
- As a result, the company will have to take a $5.5 billion charge related to its H20 products which are exclusively designed for the Chinese market.
- Depending on gross margin assumptions, the resulting revenue impact might be in the range of $10 billion to $15 billion.
- The news caught market participants by surprise as recent media reports suggested that the Trump administration had reversed course on the issue.
- With Nvidia now deeply entangled in the new U.S. administration’s trade war, headline risk has increased substantially. In addition, growth expectations are likely to come down. As a result, I am initiating coverage of NVDA stock with a “Sell” rating.
After the close of Tuesday’s regular session, AI graphics processing unit behemoth NVIDIA Corporation (NASDAQ:) or “Nvidia” shocked investors with the of an entirely unexpected $5.5 billion charge after the U.S. government effectively precluded.
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