Nvidia shares dropped 7% after the AI chipmaker warned of higher costs tied to President Donald Trump’s export controls on China.
In a Tuesday filing, Nvidia disclosed that it would take a $5.5 billion charge to export its H20 graphics processing units to China and other countries. The company also noted that shipping these chips will now require a government license.
šµš°Don’t miss the move: Subscribe to TheStreet’s free daily newsletter š°šµ
The H20 chip was specifically designed under President Joe Bidenās administration to comply with earlier U.S. export restrictions, which blocked sales of advanced AI processors to China. The chip generated estimated sales of $12 billion to $15 billion in 2024.
The latest tariff news deepens Nvidiaās recent tumble. The stock is down 22% so far this year, weighed by the rollout of Chinaās cheaper AI model DeepSeek, disappointing earnings, and a market pullback amid rising economic uncertainties.
One Wall Street veteran is now reevaluating Nvidia’s stock price target in light of these developments.
Even before the latest update, Wall Street was growing cautious on Nvidia.
Image source: Morris/Bloomberg via Getty Images
Fund manager sees larger impact for Nvidia in the coming quarter
Chris Versace, TheStreet Pro Portfolio’s lead fund manager, noted that Nvidia is “a likely pawn in Trumpās negotiating with China.”
Related: Bank of America gives eye-popping Nvidia stock forecast amid tariffs
The 30-year veteran sees challenges ahead as he doesnāt expect the negotiations between China and the U.S. to go quickly.
“More likely, weāll see Trump and his team seek trade deals with other nations first, potentially to up the pressure on China. Whether that is a successful strategy may hinge on trade deal progress in the coming several weeks,” Versace said.
Versace lowered NvidiaāsĀ (NVDA) Ā stock price target to $150 from $175 following the news, while he maintained a āBuy Nowā rating as the stock āstill offers ample upside.ā
“We continue to see Nvidia as being extremely well positioned given ramping AI and data center spending, with margins poised to improve as Blackwell manufacturing matures,” Versace wrote.
Related: Cathie Wood buys $15 million of tumbling Nvidia stock
“Given the timing of this development, we will see a modest impact in the current quarter but a larger one in the ensuing ones,” he said. āThe smart move would be to revisit the shares once Taiwan SemiconductorĀ (TSM) Ā delivers its March quarter results early tomorrow morning and updates its outlook. The H20 chip development is likely to result in TSM delivering somewhat weaker than expected guidance.”
Versace first added Nvidia to his portfolio in February 2024. The stock now accounts for 3.7% of his holdings, with an average return of 20.6%.
Analysts already lowered Nvidia price target before the news
Even before the latest update, Wall Street was growing cautious on Nvidia.
Earlier this week, DA Davidson lowered its price target on Nvidia to $120 from $125 and kept a neutral rating.
The firm pointed to the risk of negative GDP growth in the coming quarters, which could drag down overall growth expectations and valuations.
More Nvidia:
Bank of America offers Nvidia stock forecast amid tariffsAmazon directly targets Nvidia with bold new strategyAnalyst unveils startling Nvidia stock forecast amid tariffs
DA Davidson also noted that regardless of the outcome of the tariffs, it expects a slowdown in both consumer activity and corporate investment ā at least over the next few quarters.
Nvidia shares were trading around $104 as of April 16.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
