Analyst Sticks With Nvidia Despite Fallout From China Curbs

Core Viewpoint - Nvidia's stock has declined 14% following the H20 effective shipment ban to China, with concerns surrounding sales in China, AI Diffusion Rules, gross margin pressures, and cloud capex visibility impacting the stock performance [1][2][3]. Group 1: Key Concerns - Four main concerns affecting Nvidia's stock include: 1. Sales in China 2. AI Diffusion Rules 3. Gross margin return to mid-70% by the fiscal second half amid sales cuts and cost pressures 4. Cloud capex visibility extending into calendar 2026 [1][2]. Group 2: Financial Projections - Revised base case EPS for fiscal 2026 and 2027 is projected at $3.97 and $5.74, respectively, reflecting the impact of the H20 ban [2][4]. - In a worst-case scenario of a 10% sales drop due to AI Diffusion Rules, EPS could decline by an additional 14% to $3.69 and $4.98 for fiscal 2026 and 2027 [7]. Group 3: Valuation Metrics - Despite the challenges, Nvidia is trading at 19 times calendar 2026 P/E, significantly below the historical median of ~30 times and typical cycle trough of ~23 times [3][8]. - The stock is currently valued at 16.6 times the new base case calendar 2026 EPS, indicating an attractive valuation even under worst-case scenarios [8]. Group 4: Analyst Recommendations - BofA Securities analyst Vivek Arya reiterated a Buy rating on Nvidia, viewing current stock volatility as a buying opportunity, while lowering the price target to $150 from $160 [4]. - Arya's new assumptions exclude sales of H20 and MI308 products, which now require licenses for shipment to China, estimating a ~4% sales and ~5% EPS impact for Nvidia in calendar 2026 [4][5].