Bernstein trims Nvidia price target on China chip sales restrictions

Published Thu, Sep 1 20228:10 AM EDT

Bernstein trimmed its price target on Nvidia after a regulatory filing revealed that the U.S. is restricting the chipmaker from selling certain chips in China . Analyst Stacy Rasgon lowered his price target on the stock to $180 from $210 a share to account for lower estimates amid the expected $400 million loss for data center sales estimated by the chipmaker. Despite the price cut, Bernstein's target suggests shares could rally more than 19% from Wednesday's close. "It feels prudent to take the impacted China revenues out of our NVIDIA numbers," Rasgon wrote while retaining his outperform rating on the stock. "This may turn out to be overly punitive as we can see the potential to garner some licenses etc (while we get the effort to limit China military risk presumably the US does not want to overly burden our own companies unnecessarily either)." Advances Micro Devices also indicated that it was asked to stop selling some of its chips to China. Like Rasgon, Bank of America's Vivek Arya maintained his buy rating on the chip stock, noting that he expects the company to learn how to control the impact in the future despite the near-term troubles. While uncertainty lies ahead, both Arya and Morgan Stanley's Joseph Moore believe that Nvidia could potentially replace some of its sales in China with older products not affected by the restrictions. That said, this shift could create significant long-term consequences like continued developments in the artificial intelligence processor space in China, Moore said. "Any regulatory action that blocks Chinese software companies from buying US chips - whether it comes from Beijing or Washington - should provide significant incentive for those Chinese customers to seek out local alternatives, even if those solutions prove to be less capital efficient than using NVIDIA," he said in his note to client. The chip stock has tumbled nearly 49% this amid the broader market turmoil. Shares fell about 5% in the premarket. — CNBC's Michael Bloom contributed reporting