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As the outgoing Biden administration significantly tightens the American noose around AI chips, narrowing NVIDIA's TAM in the process, HSBC is out today with a rare sobering take on the GPU maker's near-term prospects.
To wit, HSBC analyst Frank Lee notes at the outset that NVIDIA will be "under increasing pressure to deliver an even stronger H2 FY26 ramp of its GB300/B300 platform" to counter the "potentially weaker H1 FY26 momentum." Bear in mind that NVIDIA's FY2026 roughly aligns with CY2025.
Consequently, given the chipmaker's reduced sales-related momentum in the first half of 2025 vs. previously baked-in expectations, Lee now expects NVIDIA to sell ~35,000 NVL72-equivalent AI server racks in CY 2025 as opposed to HSBC's previous sales assumption of 41,500 AI racks, equating to lower full-year datacenter revenue estimate of just around $236 billion from an earlier estimation of $253 billion.
Interestingly, Lee's bear-case scenario for NVIDIA entails full-year datacenter-related sales of "20K-25K NVL racks" and an EPS estimate of between $4.84 and $5.14, which "remains 8%/14% above consensus [estimate] of USD4.50."
Lee goes on to note:
"We lower our FY26 EPS estimates by 6% to reflect slower H1 FY26 Blackwell ramp."
Given this reduced full-year EPS estimate, HSBC has trimmed its "target price [for NVIDIA shares] to USD185 (from USD195) based on an unchanged target FY26 PE of 32x."
Of course, as stated earlier, HSBC's revisions are premised on a slower production ramp-up of NVIDIA's latest Blackwell architecture GPUs. Nonetheless, do note that Jensen Huang recently declared at the CES 2025 that "Blackwell is in full production" now.
$NVDA White House confirms global curbs on exports of AI chips by Nvidia and its peers; No restrictions apply to chip sales to 18 key allies and partners; Trump administration to decide how and whether to implement curbs
- Six key mechanisms in the rule catalyze the…
— TradeTheNews.com (@Trade_The_News) January 13, 2025
Meanwhile, as stated earlier, the outgoing Biden administration has now significantly tightened the US export controls around AI chips:
- No sales restriction for 18 key allies and partners, including UK, Japan, and the Netherlands.
- Cloud giants such as Google, Amazon, and Microsoft can buy unlimited GPUs, but cloud providers must retain at least half of their GPU computational power within the US.
- No restrictions on any given chip order with a cumulative computation power that is equivalent to 1,700 advanced GPUs.
- Entities that meet specific trust standards and are headquartered within the jurisdictions of close allies and partners of the US can obtain a "Universal Verified End User" (UVEU) status, allowing the placement of 7 percent of the total computational power of each such entity anywhere around the globe.
- Entities that meet specific trust and security requirements but are not headquartered within the jurisdictions of close allies and partners of the US can obtain a "National Verified End User" (VEU) status, which unlocks a buying power equivalent to 320,000 advanced GPUs for each such entity over the next 2 years.
- Non-VEU entities will retain a buying power equivalent to 50,000 advanced GPUs per country.
- Governments that meet specific criteria and enter into an arrangement with the US can unlock a buying power equivalent to 100,000 advanced GPUs per country.
The Biden Administration's "AI Diffusion" rule will stifle innovation and undermine America’s global technology leadership. Restricting access to mainstream computing risks derailing AI progress for industries at home and abroad.
America’s strength lies in innovation and…
— NVIDIA (@nvidia) January 13, 2025
Given the significant sales-related implications of this measure, it is hardly a surprise that NVIDIA has slammed Biden administration's AI diffusion rules by declaring that they will "stifle innovation and undermine America’s global technology leadership." The statement goes on to note that "this rule will only harm the U.S. economy, set America back, and play into the hands of U.S. adversaries."
