Nvidia Corp (NASDAQ: NVDA) has been in a sharp uptrend ever since the White House agreed to a 90-day trade truce with China.
Plus, the artificial intelligence behemoth recently reported its financial results for the first quarter that topped Street estimates and issued upbeat guidance for the future, further boosting confidence in NVDA.
However, not everyone on Wall Street is super bullish on Nvidia stock anymore. Analysts at HSBC as well as D.A. Davidson continue to rate the AI darling at “hold” only.
Why does D.A. Davidson remain dovish on Nvidia stock?
Following the company’s earnings release on May 28th, D.A. Davidson did raise its price target on NVDA shares to $135 – which is roughly in line with the price at which the AI darling is trading already.
Gil Luria, a senior analyst at the investment firm sees US chip export regulations that effectively disable the multinational from doing business in China as the largest overhang on Nvidia stock.
“It’s our belief that the Street is under-accounting Chinese contribution to Nvidia revenue,” he told clients in a research note this week, adding tightened export rules under the Trump administration will continue to hurt NVDA until we get a “resolution in one direction or the other”.
Note that Nvidia chief executive Jensen Huang has already confirmed that the chipmaker doesn’t have an alternative product at the moment, which could possibly help it resume business in China.
According to D.A. Davidson, the said restrictions are “handing the entire Chinese opportunity (estimated to be worth $50 billion as per Jensen Huang) to homegrown manufacturers such as Huawei.”
More importantly, as Huawei continues to advance in artificial intelligence, Nvidia may eventually have to fight for AI customers even outside of China.
Why does HSBC remain dovish on Nvidia stock?
HSBC analyst Frank Lee remains even more bearish on Nvidia stock for similar reasons, especially since China is “right behind” the US in artificial intelligence, as per Huang’s recent remarks.
Lee expects NVDA will make a comeback in AI chips in the world’s 2nd largest economy despite H20 restrictions – but supply chain mismatches, he argued in his latest research note, could remain a headwind for the semiconductor stock.
HSBC also raised its price target on the AI stock after the chipmaker’s Q1 earnings release like D.A. Davidson.
However, its upwardly revised price target of $125 indicates potential downside of about 8.0% from here.
It’s also worth mentioning that Jensen Huang expects US export restrictions to result in an $8.0 billion hit to sales in the company’s current financial quarter.
A 0.03% dividend yield tied to Nvidia stock at the time of writing is a bit too small to be any kind of a factor in deciding on buying NVDA.
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