Wolfe Research on NVIDIA (NVDA): 'Tariff announcement an enabler of NVDA exports to China – if China provides permission'

Wolfe Research analyst Chris Caso reiterated an Outperform rating and $250.00 price target on NVIDIA (NASDAQ: NVDA).

The analyst comments "Yesterday, the White House announced a 25% tariff on certain advanced semiconductors, which we believe will principally apply to NVDA H200 shipments to China. We expect this to only affect NVDA, and only if NVDA becomes able to ship AI chips to China, which they do not ship now, and isn’t in consensus numbers. The reason for this mechanism is to enable the 25% payment to the government that was agreed in exchange for granting permission to NVDA to export H200 to China. That payment was arranged as a tariff, and is applied as the H200 is imported to the US, before being transshipped to China. That unusual arrangement provides a legal framework for the government to collect the agreed payment. Therefore, this announcement only provides the mechanism for what was agreed earlier and therefore isn’t materially new. NVDA has previously indicated that $2-5bn / qtr of China shipments (about 5% of current quarterly revenue) would be possible if they had permission for such shipments. However, while the US is now permitting these shipments, the Chinese government has not yet provided permission on their end, suggesting that full resolution of this situation is likely to be wrapped up in broader trade negotiations. This arrangement would also apply to AMD China shipments as well, should AMD choose to pursue the opportunity. Our discussions with AMD management however suggest that China shipments are a much lower priority to AMD, due to capacity constraints and higher value opportunities elsewhere."

For an analyst ratings summary and ratings history on NVIDIA click here. For more ratings news on NVIDIA click here.

Shares of NVIDIA closed at $183.16 yesterday.

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