The Biden administration made plans to stop sending some AI chips to China on Tuesday. These businesses include Nvidia (NVDA). Following the revelation, Nvidia’s shares dropped about 5% and more than 2% in early Tuesday trade.
Analysts at Citi have revised down their projections for Nvidia’s revenues for the fiscal years 2025 and 2026, citing a “low likelihood” that the US government will award export licences to the company.
Atif Malik, a research analyst at Citi, stated in a research note on Monday that “we believe the scope of the new performance density thresholds will make it difficult for NVIDIA to sell to China.”
Despite the revelation, Citi kept its Buy recommendation on the chipmaker and lowered its 12-month price target to $575 from $630, noting “secular AI growth which remains in early innings.”
The current quarter for Nvidia is scheduled to expire on October 29. The firm stated in an SEC filing on Tuesday that it does not anticipate the new US government judgement to have an impact on the financial performance of this quarter due to the “strength of demand” for Nvidia products internationally.
But it may affect growth beyond this quarter.
“The licencing requirement 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, and may require the Company to transition certain operations out of one or more of the identified countries,” the filing stated.
While it is possible to apply for licences, the business also pointed out that there is no assurance that those will be given or that the US government will “act on the request in a timely manner.”