New Nvidia Price Target After Harsh China Tariff Blow

On Tuesday night and early on Wednesday morning, there were several developments — the net effect of which looks to pressure the market and the Portfolio today.

Some of this is renewed uncertainty stemming from tariffs, but in the case of Nvidia NVDA, it is more company-specific. Per an 8-K filing with the SEC on Tuesday night, Nvidia received a notice from the U.S. government that it needs a special license to ship its H20 graphic processing units or related hardware to China, and such a license will be required indefinitely. As a reminder, although Nvidia's more advanced artificial intelligence GPUs have already been banned for export to China, the H20 chip was designed specifically to comply with export restrictions.

There had been rumblings about such a move last week, but following Nvidia announcing it would commit $500 billion to build supercomputer manufacturing plants in the U.S., we see this as Nvidia being a likely pawn in Trump’s negotiating with China. Over the last few days, China has shifted the playbook from one focused on tariffs to other ways, such as halting the export of rare earth elements and halting delivery of Boeing BA aircraft, . Our sense is that if a special license were going to be granted, then Nvidia would not taking a $5.5 billion inventory write-down charge in the current quarter. This suggests a more immediate stoppage in shipments and one that may not resume in short order.

But we are also seeing some potential thawing on the trade talk front between China and the U.S. It’s being reported that Beijing wants the Trump administration to show more "respect" and name a point person for talks. Other conditions include a more consistent U.S. position and a willingness to address China’s concerns around American sanctions and Taiwan. For now, we’ll have to see how this plays out, but our instinct tells us not to expect a quick fix. More likely, we’ll 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.

As it relates to Nvidia, we suspect we’ll see some modest price target adjustments as Wall Street bakes a revenue hit into its revenue expectations. Estimates peg China as a 10% customer of Nvidia, and given the timing of this development, we will see a modest impact in the current quarter but a larger one in the ensuing ones.

That is leading us to reduce our NVDA price target to $150 from $175, which still offers ample upside to maintain our One rating. 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.

While NVDA shares are under pressure today, the smart move would be to revisit the shares once Taiwan Semiconductor TSM 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, and that could weigh on NVDA shares a bit further. As we clear that event, based on where NVDA shares are trading, we’ll plot our next move with the shares.

More Pro Portfolio: (updated April 14)

At the time of publication, TheStreet Pro Portfolio was long NVDA.