Citi cuts Nvidia price target on U.S. chip export restrictions to China

Published Wed, Oct 18 20236:28 AM EDTUpdated Wed, Oct 18 20231:34 PM EDT

The artificial intelligence boom's favorite play comes with greater risks now, according to Citi. Citi maintained its buy rating on Nvidia but lowered its price target to $575 from $630. That still implies 30.9% upside for the stock since Tuesday's close. The bank's lowered outlook comes after the U.S. Department of Commerce announced new export restrictions Tuesday that would curb the sale of more advanced AI chips to China. The move will restrict the export of Nvidia's A800 and H800 chips as the federal government attempts to further tighten last year's restrictions on AI chip exports. "We are de-risking our FY25/26 estimates and assume low likelihood of US government granting export licenses," analyst Atif Malik wrote in a Wednesday note. "We believe the scope of the new performance density thresholds will make it difficult for NVIDIA to sell to China as it will require more than the networking modifications it made on prior A800/H800 China products." Nvidia shares lost 4.7% Tuesday and traded 1.5% lower during premarket trading Wednesday. The AI darling is still up more than 200% for the year. Malik lowered his full-year 2025 earnings per share 0.3% to reflect lowered China exposure with Nvidia's GeForce RTX 4090 graphics cards. He also lowered his full-year 2026 earnings per share forecast 9% on reduction in China data center compute sales. The analyst noted that Nvidia's GPUs will be affected in regions beyond China, as the federal government's Interim Final Rule adds licensing requirements for exports to China and countries including Saudi Arabia, the United Arab Emirates and Vietnam. The analyst maintained his optimism on the chipmaker's long-term growth, reiterating the stock a "buy on secular AI growth which remains in early innings, in our view." Citi isn't alone in lowering its price target. Morgan Stanley analyst Joseph Moore lowered his target by $30 to $600 on the back of the new export controls. Although Moore said the tightened restrictions are likely to have minimal incremental effect, he views the AI restrictions to regions such as China and Saudi Arabia as a greater threat to Nvidia's revenue than the firm initially thought. — CNBC's Michael Bloom contributed to this report.