What is Nvidia?
Nvidia is a leading technology company known for manufacturing graphics processing units (GPUs) used in gaming, artificial intelligence, and data centers. Its innovations have been key in advancing these fields.
Current Situation of Nvidia’s Stock
Current Price: $139.40 per share.
Recent Change: Increased by $0.56 (0.4%) compared to the previous close.
Next Earnings Report
Nvidia is scheduled to announce its financial results on February 26, 2025. Investors will be closely watching these key points:
- Total Revenue: A significant increase is expected due to the growing demand for GPUs.
- Data Center Segment: This area has shown notable growth, and the trend is expected to continue.
- Competitive Impact: The emergence of competitors, such as the Chinese startup DeepSeek, could influence Nvidia’s market share. (*) More details on this topic below.
Key Factors to Consider
- Investment in AI: The European Commission has announced a €200 billion investment in artificial intelligence infrastructure, which could benefit Nvidia.
- Global Demand: Countries like South Korea plan to acquire 10,000 GPUs for national AI centers, indicating sustained demand for Nvidia’s products.
Short-Term Price Forecasts
- Bank of America Securities: Price target of $190, representing a potential 35% increase.
- BS: Maintains a "Buy" rating with a price target of $185, supported by stable rental prices for Nvidia’s H100 chips.
How Will New U.S. Trade Policies Impact Nvidia?
Tariffs on China and Export Restrictions
The U.S. has imposed restrictions on the sale of advanced chips to China, directly affecting Nvidia, as China was one of its main customers.
Nvidia had to create downgraded versions of its GPUs for China (such as the H800 and A800 instead of the H100 and A100), but new restrictions now prevent even the sale of these models.
As a result, Nvidia is losing revenue in the Chinese market, which could impact its growth.
Manufacturing and Supply Costs
Although Nvidia designs its chips in the U.S., it does not manufacture them directly. Its most advanced chips, such as the H100 and A100, are produced by TSMC in Taiwan and Samsung in South Korea.
If the U.S. imposes tariffs on importing chips manufactured in Asia, Nvidia would have to pay more to bring its own products back to the U.S.
Additionally, potential tariffs on other key components, such as HBM memory (manufactured in South Korea and Japan), could further impact Nvidia’s GPU costs.
China’s Retaliatory Tariffs
China could respond to U.S. tariffs by restricting exports of rare minerals, which are essential for chip manufacturing.
This would increase production costs for Nvidia and other semiconductor companies.
In Summary:
- Nvidia is not affected by import tariffs within the U.S. but is impacted by export restrictions on its chips to China.
- If the U.S. imposes tariffs on importing semiconductors made in Asia, Nvidia could face higher costs.
- China’s retaliatory actions, such as restricting access to key minerals, could raise Nvidia’s chip production costs.
Conclusion:
Although Nvidia does not manufacture directly in China, its supply chain and customers are involved in the trade conflict, making tariffs and restrictions a significant factor.
(*) How Does DeepSeek Impact Nvidia’s Competitiveness?
DeepSeek and Its Impact on GPU Demand
DeepSeek is an artificial intelligence model developed in China, similar to OpenAI’s GPT-4. These models require high computing power, which generally boosts demand for high-performance processors like Nvidia’s H100 GPUs.
However, if China develops models like DeepSeek using alternative hardware, demand for Nvidia GPUs in the Chinese market could decrease, affecting its sales.
Competition in the AI Chip Sector
The AI hardware market is not solely dominated by Nvidia. Chinese companies like Huawei and Biren Technology are developing specialized chips aimed at replacing Nvidia in China, especially given U.S. export restrictions.
If DeepSeek optimizes its performance using Chinese hardware instead of relying on Nvidia, a local ecosystem could emerge, reducing China’s dependence on Nvidia GPUs.
Regulations and Sanctions
Tensions between the U.S. and China have led to restrictions on selling advanced chips to Chinese companies. Nvidia has been forced to produce downgraded versions of its GPUs to comply with these regulations. If DeepSeek fosters a self-sufficient AI ecosystem in China, Nvidia’s demand in that region could decline further.
What Does This Mean for Nvidia?
In the short term, DeepSeek is not a direct threat, but it signals China’s accelerated push for AI independence. If this trend continues, Nvidia could see a reduced market share in China, one of its largest chip buyers.
Is Nvidia a Good Investment Opportunity?
Although Nvidia’s stock has recently rebounded, it is essential to consider:
- Current Valuation: After a 171% increase in 2024, some analysts suggest the stock may be overvalued.
- Future Growth: Continued investment in AI and expansion into global markets could drive long-term growth.
Conclusion
Nvidia remains a dominant player in the tech sector, with multiple factors that could influence its future performance, such as DeepSeek and other Chinese developments that might limit its growth in the Asian market over the medium and long term. Investors should carefully evaluate risks and opportunities before making financial decisions.
This analysis provides a clear overview of the key factors to watch regarding Nvidia and how they may impact its market performance.
