Nvidia Stock Analysis as a Fresh Headwind Emerges

Key Insights

• Nvidia stock dropped in the pre-market after new risks emerged.
• The US is considering export controls for its chips.
• It is also planning to limit the number of chips it sells to China.

Nvidia stock continues to trail the broader market despite the ongoing AI boom and its strong revenue growth. It slipped by 1.30% in the pre-market today, undoing some of the gains made earlier this week. This retreat happened after new reports on export control by the US government.

Nvidia Stock Slips on Reports of Export Control For AI Chips

A report by Bloomberg says that the Trump administration is considering taking measures that will complicate how Nvidia does its business. If the Commerce Department prevails, all chip sales to other countries will need approval. That measure will also affect AMD, the other top chip manufacturer.

The report adds that shipments of up to 1,000 GPUs will go through an easy process. Additionally, for large GPU orders of over 200,000 units, companies and their governments will need a license from US authorities.

It is unclear how much these measures will cost Nvidia and other businesses. That’s because most of its revenue comes from a few American companies like Microsoft, Google, and Amazon.

NVDA’s China Woes are Continuing

NVDA stock also retreated as concerns about its Chinese business continued. China allowed the company to sell its GPUs to its customers last year.

However, US authorities have continued to review some of the potential clients. Alibaba, one of the companies ready to make a big order, has been placed in an entity list for working with the Chinese military. This means that it will not be able to buy chips from an American company.

In another report, the US is also planning to add a cap on the number of Nvidia chips that Chinese customers can buy. Each company will only be allowed to buy up to 75,000 chips. Additionally, shipments of similar chips by AMD will count to that number.

The US has always aimed to prevent Chinese companies from having access to the most advanced Nvidia chips. It does this to ensure that it has supremacy in the growing AI industry and prevents its technology from being used to support the military.

These restrictions have cost Nvidia billions of dollars in revenue, as China is the biggest market for semiconductors. Its CEO, Jenseng Huang, believes that the company can make over $50 billion a year from the country.

Nvidia’s Business is Still Doing Well Without China

On the positive side, recent results showed that its business was doing well even without China. Its revenue jumped to $68 billion in the fourth quarter, $3 billion higher than what it had provided in its guidance. It was also higher than what analysts were expecting.

Most models estimate that the company’s annual revenue will cross the $500 billion milestone in 2028. This will be a big milestone for a company that made over $22 billion in 2022.

Also, this modelling does not include any sales to China. Also, it does not include its upcoming CPU business, which it expects to launch this year. As such, there is a possibility that it will cross that milestone earlier.

Nvidia Share Price Chart Analysis

Nvidia share price has been flat for months. As a result, it has underperformed other top companies in the tech industry and top indices like the Dow Jones and the S&P 500.

The stock is now inside the horizontal channel whose support is at $170 and resistance is at $197. This price is also along the 23.6% Fibonacci Retracement level and the 50-day moving average.

NVDA chart | Source: TradingView

Therefore, the short-term forecast for the stock is neutral. A drop below the lower side of the channel at $169 will confirm the bearish breakout and point to more downside to $150 and below.

On the other hand, a rally above the upper side of the channel at $197 will confirm the bullish breakout. Such a rally will push it to the all-time high of $212 and above.

The post Nvidia Stock Analysis as a Fresh Headwind Emerges appeared first on The Market Periodical.