TLDR:
- NVIDIA stock fell 1.13% to $113.1 in premarket trading on Monday
- The company faces potential 20% reduction in addressable market due to U.S. export restrictions
- NVIDIA earned about 13% of annual revenue from China in the last fiscal year
- Huawei’s 910D AI chip poses emerging competition to NVIDIA’s H100 in the Chinese market
- Despite concerns, analyst Nauman Khan rates NVIDIA a “Strong Buy” with Wall Street setting a $164.23 price target
NVIDIA’s stock took a hit Monday morning as investors weighed continued strong AI spending against growing export restrictions and Chinese competition. The chip giant’s shares dropped 1.13% to $113.1 in premarket trading, despite having risen 2.6% on Friday and gaining over 17% in the past month.
The stock’s recent gains had been supported by major tech companies reaffirming their commitment to AI infrastructure investments. Microsoft, Meta Platforms, and Amazon.com all recently stated their intention to keep investing heavily in AI systems, which rely heavily on NVIDIA’s chips.
However, a shadow has fallen over these positive developments. BofA Securities analyst Vivek Arya warns that U.S. export restrictions could reduce NVIDIA’s long-term total addressable market by 20%.
Half of this potential market reduction comes directly from China, based on the country’s contribution to global cloud capital expenditure. The remaining impact will depend on how strictly the U.S. administration implements AI diffusion rules.
Despite these challenges, Arya maintains a “Buy” rating on NVIDIA shares with a $150 target price.
Competition Heats Up in China
The export situation is becoming more complex with the emergence of domestic Chinese competitors. Huawei is making progress with its 910D AI chip, which analysts say could potentially take market share from NVIDIA’s H100 offering in China.
This threat is particularly concerning given the Trump administration’s restrictions on sales to China. Some industry observers worry that Huawei could become “the hardware of choice” for Chinese companies as a result.
NVIDIA has already disclosed that U.S. export restrictions will cause it to absorb losses of $5.5 billion in the recently ended quarter. This is a substantial hit, considering China represented approximately 13% of NVIDIA’s annual revenue in the last fiscal year.
Wall Street Remains Bullish
Despite these headwinds, many analysts remain optimistic about NVIDIA’s prospects. Five-star investor Nauman Khan acknowledges the risks but believes NVIDIA will maintain its market leadership.
“Trade tensions and rising competition pose risks, but NVIDIA’s deep partnerships with major cloud providers and upcoming Blackwell chips provide strong growth catalysts,” Khan explains.
Khan argues that Huawei’s 910D chips won’t seriously threaten NVIDIA’s dominance. He points out that NVIDIA’s forthcoming Blackwell GPU offers greater efficiency and better software integration.
The stock price decline has created a buying opportunity, according to Khan. He notes that NVIDIA currently trades at a price-to-earnings ratio of 24x, well below its five-year average of 65x.
“My suggestion is to load up while the price is attractive, and let NVIDIA’s AI juggernaut drive returns over the next several years,” Khan states.
Wall Street broadly shares this optimistic view. NVIDIA currently holds a “Strong Buy” consensus rating, with 34 Buy, 5 Hold, and 1 Sell recommendations.
The average 12-month price target stands at $164.23, representing a potential upside of over 40% from current levels.
Other chip makers also felt pressure on Monday, with Advanced Micro Devices down 0.76% and Broadcom falling 1.3% in premarket trading.
The recent stock price movement reflects the ongoing tension between NVIDIA’s central position in the AI boom and increasing geopolitical challenges to its global business.
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