On September 27, Nvidia (NVDA) shares witnessed a 2% dip, triggered by reports of China’s government dissuading local businesses from purchasing the tech giant’s microchips.
Media outlets, including Bloomberg News, disclosed that Beijing officials are urging Chinese enterprises to opt for homegrown artificial intelligence (AI) microchips rather than Nvidia’s globally renowned processors.
In a bid to fortify the domestic semiconductor sector amidst ongoing trade tensions with the U.S., the Chinese Ministry of Information and Technology has specifically cautioned against Nvidia’s H20 series of chips – instrumental in powering AI models and applications – signaling a red flag for local companies.
National Pride Clashes with Technological Superiority
Though an outright ban on Nvidia’s products is not imposed, Chinese authorities are issuing “guidance” to promote domestic products over foreign ones.
The heightened emphasis on Chinese microchips and semiconductors is a manifestation of the escalating rivalry in the high-tech realm. The Biden administration recently placed restrictions on microchip exports to China to curb potential military applications of the technology.
China has been a lucrative market for Nvidia, accounting for a quarter of its annual revenue. Despite stringent export controls from the U.S., Nvidia has been ingeniously tailoring its premium microchips, like the H100 series, to meet Chinese demand while complying with American regulations, albeit at a 50% computing capacity reduction.
Is NVDA Stock Still a Golden Opportunity?
Despite the recent tumultuous market dynamics, Nvidia’s stock retains a Strong Buy rating from 42 Wall Street analysts, reflecting 39 Buy and three Hold recommendations in the past quarter. Notably, no Sell ratings have been issued. With an average price target of $152.44, analysts foresee a promising 25.68% upside potential from the current levels.
