Nvidia Stock Pops After Sharp Fall on Trump China Threat. Why It’s Brushing Off AI Fears.

Nvidia chips are the favored choice for training artificial-intelligence models. (David Paul Morris/Bloomberg)

Key Points

• Nvidia’s stock rose 2.5% in premarket trading, recouping some losses after U.S.-China trade tensions appeared to cool.
• Chinese revenue for Nvidia accounted for 12% of its global total, a decrease from 21% a year earlier.
• Mizuho analyst Vijay Rakesh increased Nvidia’s target price to $225 from $205, maintaining an Outperform rating.

Nvidia stock was rising early Monday. The chip maker was recouping some of its losses from late last week as trade tensions between the U.S. and China appeared to cool.

Nvidia is on the front lines of the conflict between the world’s two largest economies. Chinese authorities are cracking down on imports of semiconductors with the aim of stopping its domestic companies from buying Nvidia hardware, the Financial Times reported Friday, citing anonymous sources.

Nvidia shares were up 2.8% at $188.35 in early trading. The stock fell 4.9% on Friday after U.S. President Donald Trump said he would hit China with a 100% additional tariff and impose new export controls on critical software products.

However, Trump struck a more conciliatory tone in a Truth Social post during the weekend—saying he wanted to help China, not hurt it. That was providing a boost to the stock market in general and highflying technology stocks such as Nvidia in particular.

In the past four quarters, Nvidia’s China revenue accounted for 12% of the company’s global total, down from 21% a year earlier. Nvidia is currently forecasting no Chinese revenue for its current quarter, which implies a loss of between $2 billion and $5 billion in potential sales, according to the company’s executives.

While the loss is annoying, it is relatively small compared with Nvidia’s overall business. Mizuho analyst Vijay Rakesh raised his target price on Nvidia to $225 from $205 and kept an Outperform rating on the stock. He brushed off concerns about a bubble in AI spending being set to pop.

“We still think companies will be inclined to invest due to potential future benefits, risk of lagging behind competition, and some success in AI-related savings,” Rakesh wrote.

Nvidia is set to generate more than $300 billion in revenue from AI data centers in 2028, while Broadcom will take between $80 billion and $90 billion, and Advanced Micro Devices will generate more than $40 billion, according to Rakesh.

Among other chip stocks, Broadcom was gaining more than 8% in early trading after announcing it was partnering with ChatGPT-developer OpenAI to develop and deploy 10 gigawatts of custom AI accelerators.

That would match a similar deal reached between Nvidia and OpenAI last month. Nvidia agreed to supply 10 gigawatts of AI infrastructure to OpenAI, and said it would invest up to $100 billion in the AI start-up.

Write to Adam Clark at adam.clark@barrons.com