Sales of Nvidia’s revamped “made for China” artificial intelligence chip could exceed pessimistic expectations — a potentially significant development for the top-performing Club stock, according to a new Wall Street study. Demand for one of Nvidia’s China-specific H20 chips is “much higher than expected” and could generate between $9 billion and $12 billion in additional revenue this year, analysts at KeyBanc Capital Markets said in a report on Sunday. note addressed to customers. Nvidia’s company sales for the 12 months ending January 2025 are currently expected to be nearly $111 billion, according to consensus estimates compiled by FactSet. This implies growth of more than 80% compared to its previous financial year. “We know the Chinese business has fallen off a cliff, so any good news is a positive surprise,” Club director of portfolio analysis Jeff Marks said Monday in reaction to KeyBanc’s note. Still, we don’t count on a recovery in China in the near future, and the company may not need one yet given the strong demand for its chips elsewhere in the world. In recent weeks, other Wall Street analysts have offered differing views on the state of Nvidia’s China-specific AI chips. For example, Wolfe Research said the H20 “has not yet gained traction” with customers, in a note to customers dated March 22. Nvidia shares were down about 0.9% on Monday, to about $872 each. Since the start of the year, the stock has increased by almost 76%, the largest increase of all Club stocks. Nvidia has been sampling AI chips designed to comply with U.S. government export restrictions on Chinese customers since last fall. But questions arose about whether those customers wanted those processors because of their lower computing power than the high-end chips available to U.S. tech giants like Microsoft, Amazon and Meta Platforms. In January, the Wall Street Journal, citing people familiar with the matter, reported that Alibaba and Tencent had told Nvidia they intended to order fewer of its limited chips than previously planned. Those initial plans were made before the U.S. government implemented stricter rules on exports of AI technology in October, making Nvidia’s first AI chip designed for China too powerful. Nvidia went back to the drawing board and developed a revised suite of products, including the H20, that meet Washington’s current performance requirements for AI chips and therefore can be shipped without obtaining a license from the US government. The Biden administration has said its limits on AI technology exports to China — first enacted in 2022 and then strengthened in October — were necessary for national security purposes. NVDA 1Y reflects Nvidia’s stock performance over the past 12 months. Nvidia has seen its business explode and its stock price soar since late 2022, when the launch of ChatGPT sparked a wave of investment in AI technology. Nvidia is by far the leading maker of AI chips, and strong demand for its processors in the United States and other countries has allowed the company to recover from the recent hit to its China business and increase its total sales at an impressive rate. Nvidia’s long-term opportunities in the world’s second-largest economy remain uncertain, however, as additional geopolitical hurdles could arise and competition from Chinese companies such as Huawei could become more pronounced in the coming years. Fostering a domestic microchip industry has been a key priority for Chinese President Xi Jinping. Chinese customers have historically contributed 20% to 25% of Nvidia’s data center business, the company said. But in the three months ending in January, that figure fell to a single-digit percentage of Nvidia’s $18.4 billion in data center revenue as the latest controls took effect. exporting, management said during the February earnings conference call. Nvidia said it expects China’s contribution to data center sales to be in a similar range in the current quarter, which ends in a few weeks. “After that, I hope we can compete for our business and do our best. And we’ll see how it goes,” CEO Jensen Huang said at the time. Based on its quarterly supply chain checks, KeyBanc said results could prove better than expected due to a “significant increase” in demand for H20. The company previously estimated that chip orders would be between 150,000 and 200,000 in 2024. KeyBanc has now revised its forecast upward to between 600,000 and 800,000, according to analysts, leading to projections of 9 to $12 billion in additional revenue this year. On Sunday, KeyBanc raised its price target on Nvidia from $1,100 per share to $1,200, citing what it sees as stronger-than-expected H20 demand and strong interest in Nvidia’s recently announced GB200 server systems. . The product, which uses the Blackwell architecture and integrates multiple processor types for AI computing, was unveiled at Nvidia’s anticipated GTC conference last month. To explain the increase in its price target, KeyBanc also pointed to Nvidia’s plans for production capacity with its chipmaking partner, Taiwan Semiconductor Manufacturing Company, as a sign that AI-related revenues will rise again. next year. (Jim Cramer’s Charitable Trust is long NVDA, MSFT, AMZN and META. See here for a complete list of stocks.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim n ‘performs a transaction. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charity’s portfolio. 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Visitors to the Nvidia booth during the Apsara 2022 conference in Hangzhou, China, November 3, 2022.
Nvidia shares soar | Future publications | Getty Images
Sales of NvidiaThe revamped “made for China” artificial intelligence chip could exceed pessimistic expectations – a potentially significant development for the Club’s top-performing stock, according to a new Wall Street study.
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