Nvidia H20 Chip Ban Could Lead To 'Manageable' Sales Drop, Bank Of America Says
Shares of Nvidia Corp. (NASDAQ:NVDA) tumbled more than 6% on Wednesday morning trading in New York after fresh U.S. export curbs on AI chips to China rattled the market, yet some Wall Street analysts see the pullback as a rare buying opportunity.
In a note shared Wednesday, Bank of America analyst Vivek Arya said the latest H20 chip restrictions to China, while unwelcome, were largely anticipated and pose only a "manageable risk" to Nvidia's sales outlook.
The investment bank reiterated a bullish stance on Nvidia, maintaining a Buy rating and a $160 price target, which implies a 42.6% upside from Tuesday's $112.20 close.
Despite a looming $5.5 billion charge and tighter U.S. export rules, Arya believes the company's deep AI moat and new product cycle could more than offset short-term pain.
Why Is Nvidia Taking A $5.5 Billion Hit?
Nvidia disclosed after the close on Tuesday that it will record a $5.5 billion first-quarter charge related to inventory, purchase commitments and reserves following a new U.S. government requirement.
The policy mandates a license to ship H20 and equivalent AI chips to China and arms-embargoed countries.
The H20 chip, a specialized version of Nvidia's powerful AI hardware tailored to bypass earlier export rules, had emerged as a critical part of its China sales strategy. Yet, with the Trump administration tightening loopholes, those sales are in jeopardy.
Arya said the charge likely reflects "a high probability of H20 restriction" and a "low probability of future licenses," suggesting Nvidia has priced in the worst-case scenario.
How Much Could Nvidia Lose?
Bank of America estimates the H20 ban could lead to a manageable 5%-8% drop in sales and a 6%-10% hit to pro-forma earnings per share in fiscal year 2026 (calendar 2025).
That's based on assumptions that H20 sales make up about 6%-10% of Nvidia's China revenue, which itself accounts for roughly 14% of total company sales.
Nvidia hasn't disclosed exact figures for H20, but Arya's model projects around $12 billion in sales from the chip for fiscal 2026—well above the $8 billion consensus from data platform Visible Alpha.
While the revenue loss is significant, Arya flagged positive offsets, including accelerating U.S. AI chip demand and strong pricing for Nvidia's next-generation GB300 Blackwell Ultra chips, which are expected to launch in the second half of 2025.
Is The Stock Undervalued?
Despite mounting geopolitical risks, Nvidia shares have already begun to price in much of the damage. According to Arya, the stock now trades at around 20 times expected 2025 earnings, down from its historical trough of 23-25 times.
He said that implies investors are now forecasting earnings of about $4 per share, well below the consensus estimate of $4.50 to $5. Arya argues this disconnect offers a compelling entry point, especially as AI chip demand from firms like OpenAI, Google, and Amazon remains robust.
"The global demand for leading-edge AI and Nvidia's unmatched platform leadership can continue to offset regional headwinds," Arya said.
What About Other Chipmakers?
The new rules won't just hit Nvidia. Arya said the increased AI export restrictions are likely to weigh on other semiconductor stocks with AI exposure, including Broadcom Inc. (NASDAQ:AVGO), Advanced Micro Devices Inc. (NASDAQ:AMD), Micron Technology Inc. (NASDAQ:MU), Arm Holdings Plc (NASDAQ:ARM), Marvell Technology Inc. (NASDAQ:MRVL), Coherent Corp. (NASDAQ:COHR) and Lumentum Holdings Inc. (NASDAQ:LITE).
Washington may continue ratcheting up restrictions beyond China, and further controls could extend to semiconductor manufacturing equipment and design software, areas where the U.S. holds significant leverage.
Yet, despite the U.S.-China tech decoupling may be accelerating, Arya indicates the longer-term AI trend remains intact.
"We believe AI remains the fastest growing secular growth opportunity in semis," he said, adding that recent volatility in Nvidia stock offers an “enhanced buying opportunity” rather than a reason to panic.
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