Nvidia stock was falling on Monday as investors assess Big Tech spending on its processors and balance that against potential restrictions on the chip maker’s exports.
Shares were down 0.7%, at $113.71, in early trading. The stock rose 2.6% on Friday.
Nvidia stock rose more than 5% over the past five trading sessions and 17% in the past month, helped by technology companies Microsoft, Meta Platforms, and Amazon.com all repeating their intention to invest heavily in artificial-intelligence infrastructure, which includes Nvidia’s chips.
However, Nvidia could be facing a 20% reduction in the long-term $500 billion total addressable market for its hardware from U.S. restrictions on its exports, according to BofA Securities analyst Vivek Arya.
“China is about half of this, based on China’s direct contribution to global cloud capex. The other 10 [percentage] points is variable and will depend on how strictly the U.S. administration implements AI diffusion rules,” Arya wrote in a research note.
Arya kept a Buy rating and $150 target price on Nvidia stock.
In April, Nvidia disclosed that future sales of its H20 AI accelerators to China would require a license from the U.S. Department of Commerce, which is generally viewed as unlikely to be granted.
Nvidia is now working on the design of its AI chips in order to make a processor that can be exported to China under U.S. restrictions as soon as June, technology-focused news outlet The Information reported over the weekend. Nvidia declined to comment on the report.
On Monday, Piper Sandler analyst Harsh Kumar also quantified the “worst case” scenario if Nvidia’s top data center customers cut back on spending because of a difficult economic environment over the next year.
Kumar estimates 6.5% of the chip maker’s data-center revenue — worth about 40 cents of earnings per share — would be lost. Using a 25 times earnings multiple, the stock’s downside price would be $76.25.
On the flip side, Kumar figures the upside scenario would lead to a price of $177.45.
Trading was mixed for two other chip makers. Advanced Micro Devices was up 2% and Broadcom was down 1%.