Nvidia’s ‘China Syndrome’: Is the Stock Falling?

Like the nuclear reactor in the 1979 movie China Syndrome, NVIDIA’s stock and revenue forecasts are collapsing, and a ban on the sale of artificial intelligence chips to China is the latest to raise the temperature even further.

The stock hit a new 52-week low on Thursday, falling 12% to close at $139.37, down 7.7%. The stock has fallen a total of 22.2% over the past five trading sessions, according to Dow Jones data.

Plunging 52.6%, Nvidia is the worst performing chip stock in 2022 among the 30 constituents of the PHLX Semiconductor Index SOX.
This is a 33.5% decrease over the year. By comparison, the S&P 500 Index SPX,
fell 17%, while the tech-heavy Nasdaq Composite Index COMP
24.7% decrease.

Thursday’s move in Nvidia shares came after the semiconductor maker said in a filing with the Securities and Exchange Commission late Wednesday that U.S. regulators had said they would “prevent future exports of the company’s products to China (including Hong Kong) and Russia.” , imposes new licensing requirements effective immediately.” A100 and his upcoming H100 integrated circuit. DGX or other systems incorporating A100 or H100 integrated circuits and A100X are also subject to the new licensing requirements. ”

Full News: Nvidia Stock Drops After US Restricts Data Center Sales in China

Analysts were already debating whether Nvidia was in the clear after the chipmaker cut its outlook for the third time in months, not the first or second. Now, for the fourth time this year. But Nvidia has told analysts that earnings estimates could still be off.

Short-term impact: Approximately $400 million in expected third quarter sales from China could be at risk. Analysts surveyed by FactSet had forecast annual revenues of $28.09 billion on average at the last check. This is far from the $33.35 billion expected at the end of July and the $34.54 billion expected at the end of February. Now analysts are forced to consider whether to lower their targets again.

read: Analysts Say Semiconductor Stocks Could Plunge Another 25% As They “Enter The Worst Semiconductor Recession In A Decade”

“China Syndrome?

“China Syndrome” depicts a nuclear reactor theoretically starting to burn toward the other side of the world, China. When the film debuted on March 16, 1979, less than two weeks after the accident at the Three Mile Island nuclear power plant near Middletown, Pennsylvania, the previously little-known term entered the American dictionary. was quickly adopted by

Rasgon acknowledged that the company is working on alternatives and said it is seeking licenses for non-military customers, but said the timing and implications of these remedies are unclear. The cuts “are not trivial, but they are not an insurmountable blow, but they are of course an increasing negative as the business can be permanently damaged,” he said.

Rasgon said AMD part of Advanced Micro Devices Inc.
GPUs are also affected by bans. “However, AMD’s data center GPU sales are small and we don’t expect it to have a significant business impact at this time,” he said. He beats both stocks with a price target of $180 on Nvidia and $135 on AMD.

However, the ban’s impact could last well beyond the current quarter. Morgan Stanley analyst Joseph Moore said he expects regulators to take 18 to 24 months to determine the overall range of products affected by the ban, adding that Nvidia is known to is expected to lose at least $2 billion in revenue in 2023 based on the Data center demand from China.

“We don’t know the broader impact of the restrictions, but the specific restrictions on the A100 and H100 (basically training products introduced in the last three years) indicate that this affects new products.” Mr Moore writes. Nvidia’s target price is $182. “We speculate that this is an AI-related limitation, so we can’t expect it to affect non-AI chips, but we don’t know if the limitation is just GPUs, or custom AI ASICs or specialized chips like Intel. INTC,
Havana Processor. ”

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This limitation can also cause problems outside of Nvidia. “U.S. semiconductor restrictions on China have escalated, driving volatility in the semiconductor and equipment group,” Citi Research analyst Atif Malik wrote, adding that the company’s aggressive ” Removed Nvidia from “Catalyst Monitoring”.

Mizuho analyst Jordan Klein said he feels there will be “a broader negative view of cicadas about what restrictions will be imposed next.”

This all comes ahead of Nvidia’s big GTC conference, which kicks off on September 19th, when the company announced its next-generation smartphone to replace the now-two-year-old “Ampere” architecture amid a downturn in consumer tech. We are going to announce the “Lovelace” chip architecture. In fact, Nvidia’s recent $1.22 billion inventory claim was spent to clean out much of the old inventory ahead of the launch of “Lovelace.”

Nvidia stock was the most actively traded in the S&P 500 Index SPX.
With preliminary trading volume of 117.3 million shares, AMD’s shares are close behind with more than 94.5 million shares. His 52-week average daily trading volume for Nvidia stock is his 49 million, while AMD’s is around 83 million.

Of the 44 analysts covering Nvidia, 35 are rated buy, 8 sell and 1 sell. Six of them lowered their price targets, bringing the average price target to $210, down from $237.50 a month ago.


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