MW As Nvidia's stock sinks on China setback, here's Wall Street's big question

By Emily Bary

Analysts are debating whether Nvidia can still manage sequential growth this year as political developments pressure revenue

Nvidia Corp.'s China business was just dealt a major blow, which has Wall Street analysts wondering about the company's growth potential.

The semiconductor company disclosed late Tuesday that the U.S. government will require a license for exports of its H20 chip, which was sold into China, Hong Kong and Macau. With Nvidia $(NVDA)$ announcing that it will write off about $5.5 billion in H20 inventory for the April quarter, "you can tell the company isn't counting on any such 'licenses' being granted from this date forward," Melius Research analyst Ben Reitzes wrote.

Nvidia's stock was down 6% in premarket trading Wednesday.

See also: Nvidia to record $5.5 billion in charges due to U.S. export ban on its H20 chip for China

The question now is what the loss of China business means for Nvidia's trajectory. Reitzes, for his part, is comfortable predicting that the company can still manage sequential growth throughout the year as it takes advantage of strong spending from Big Tech customers.

"It seems (for now) that capex spending from US hyperscalers for Nvidia chips looks solid at Google, Amazon and Meta," Reitzes wrote. "While Microsoft has been sending signals of a big deceleration in data center buildouts, its spending for compute should still be solid."

He thinks Nvidia can post revenue upside for the April quarter, before going on to see 10% sequential growth in the July quarter and 7% sequential growth in the October quarter, aided by the ramp of its Blackwell offering.

A "silver lining" for Nvidia is that the H20 likely carried "much lower" growth margins than other graphics processing units in Nvidia's portfolio, so the company could see some improvement on the heels of the new government restrictions.

Jefferies analyst Blayne Curtis, meanwhile, was less confident about Nvidia's potential to post sequential growth all year. "Sentiment was already fairly low for the July quarter given concerns that the GB200 ramp continues to be slow but this new headwind makes sequential growth much more difficult," he wrote in a note to clients.

Curtis estimated that more than half of the write-down relates to finished goods or ones that were in progress. By his math, that translates to perhaps $10 billion of revenue that won't get recognized.

"We don't know when that lost revenue was to be recognized but we could see a headwind of $5B in the July quarter (vs April)," he wrote.

Plus, Nvidia faces the risk of more pressure from the Biden administration's artificial-intelligence "diffusion" rules, according to Curtis.

Bernstein's Stacy Rasgon highlighted that concern as well.

"These rules would require Nvidia's non-U.S. customers to obtain a license to purchase more than a small amount of AI parts," he wrote. "While we believe these rules are ultimately manageable, we do not know how long it will take to process and obtain appropriate licenses, and (if the rules are put into place) the regulations have the potential to impact" Nvidia's outlooks for the fiscal second quarter and the second half of the year.

He added that while he previously saw just a small chance that those rules would get put in place, the H20 development makes him "no longer so sure."

Read: Nvidia's latest move could be a bid to escape new tariffs

-Emily Bary

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April 16, 2025 08:10 ET (12:10 GMT)

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