Investors should prepare for "potential significant new China AI and export license restrictions" from the Trump administration, a Wall Street analyst said Friday. The news is likely to weigh on Nvidia stock and other AI chipmakers.
In a client note Friday, Mizuho Securities analyst Vijay Rakesh said he expects the new restrictions to come in the weeks ahead after a couple of new administration appointees are confirmed.
"We believe, based on industry headlines and checks with our Washington group, there could be significant AI restrictions coming," Rakesh said. He cited the pending nominations at the Department of Commerce of Landon Heid for assistant secretary and Jeffrey Kessler for undersecretary at the Bureau of Industry and Security.
The appointments could lead to "a complete ban of all AI chips to China," Rakesh said. That would impact Nvidia's H20 and B20, which are currently permitted for sale in China. Those processors have lesser capabilities compared with Nvidia's top-of-the-line AI processors.
The potential impact to Nvidia for fiscal 2026 could be a reduction in revenue of $4 billion to $6 billion. It could also entail a cut to earnings per share of 13 cents to 18 cents, Rakesh said.
"We believe the restrictions could extend 1) to potentially all China AI chip exports, and some legacy chips also included, 2) and could impact export licenses to countries with strong relationships to China," he said.
Nvidia Stock Wavers After Report
In fiscal 2025, China accounted for about 13% of Nvidia's total revenue, or about $17 billion including about $10 billion-plus in AI revenue.
Broadcom also would be affected because it has a custom AI chip project with China's ByteDance, Rakesh said.
In morning trades on the stock market today, Nvidia stock fell as much as 3.1% before recovering. Nvidia stock ended the regular trading session up 3.9% to 124.81.
Broadcom stock climbed 0.8% to close at 199.45.
Microsoft Seeks To Loosen AI-Chip Export Restrictions
Meanwhile, software giant Microsoft has asked President Donald Trump to change U.S. policy that heavily restricts exports of artificial intelligence chips.
In a blog post Thursday, Brad Smith, Microsoft's vice chair and president, took aim at the Biden administration's last-minute final AI Diffusion Rule, which caps the export of U.S. AI components to "many fast-growing and strategically vital markets."
"As drafted, the rule undermines two Trump administration priorities: strengthening U.S. AI leadership and reducing the nation's near trillion-dollar trade deficit," Smith said. "Left unchanged, the Biden rule will give China a strategic advantage in spreading over time its own AI technology, echoing its rapid ascent in 5G telecommunications a decade ago."
The Biden rule change put many U.S. allies in a category that imposes quantitative limits on the ability of U.S. tech companies to build and expand AI data centers in their countries, Smith said. Those countries include India, Indonesia, Israel, Greece, Poland, Saudi Arabia, Singapore, Switzerland and the United Arab Emirates.
"If left unchanged, the Diffusion Rule will become a gift to China's rapidly expanding AI sector," Smith said.
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