Nvidia(US:NVDA) Haitong Securities International·2025-04-16 11:27Investment Rating - The report assigns an "Underperform" rating to Nvidia, indicating that the stock's total return over the next 12-18 months is expected to be below the return of its relevant broad market benchmark [23]. Core Insights - The U.S. government has imposed indefinite export controls on Nvidia's H20 chips to China, which could impact approximately $5.5 billion in quarterly expenses for the company, affecting inventory, procurement commitments, and related reserves [10][11]. - If Nvidia fails to secure necessary licenses for H20 chips, it is projected that the company's FY2026 data center revenue could decline by about $15.8 billion, with operating profit decreasing by approximately $12 billion [11][12]. - The Chinese market constitutes 13.1% of Nvidia's global revenue for FY2025, with H20 chips previously holding a 60% share of China's AI inference market [11][12]. Summary by Sections Export Control Impact - The export control on H20 chips follows a similar pattern to the 2022 A100 ban, effectively enforcing a sales ban under the guise of licensing requirements [11]. - Chinese companies have preemptively purchased around $16 billion worth of H20 chips, indicating a significant demand prior to the restrictions [11]. Policy Inconsistency - Nvidia has committed to investing $500 billion in the U.S. over four years to negotiate a relaxation of export restrictions, but past administrations have tightened controls citing national security [12]. - The Biden administration's new AI export framework extends controls to Tier 2 countries, which could further impact Nvidia's revenue from these regions [12]. Domestic Substitution Opportunities - Should Nvidia exit the Chinese data center market, the landscape may shift to be dominated by Huawei, Cambricon, and Kunlunxin, with Huawei's products expected to gradually replace Nvidia's offerings [13]. - Domestic alternatives face challenges, including a significant gap in software ecosystem development compared to Nvidia's CUDA platform [13]. Potential Countermeasures from China - China may retaliate against Nvidia through measures such as antitrust investigations, which could further impact Nvidia's net profit by approximately 4% if it withdraws from the Chinese market [14]. - Various segments, including the server, gaming PC, and automotive chip markets, are expected to benefit from Nvidia's potential exit [14].