Bernstein analyst Stacy Rasgon explains that U.S. restrictions on Nvidia’s access to China effectively hand the Chinese AI chip market to Huawei, potentially strengthening Huawei’s position despite its current performance gap. However, Rasgon remains optimistic about Nvidia’s growth prospects outside China, highlighting the company’s strong market position and reasonable valuation amid easing supply constraints.
In the discussion, Bernstein Senior U.S. Semiconductor Analyst Stacy Rasgon addresses the impact of U.S. restrictions on Nvidia’s access to the Chinese market. He acknowledges that Nvidia is actively trying to persuade the Trump administration to ease these constraints, but currently, the company is effectively shut out of China. This exclusion is costly, potentially resulting in billions of dollars in lost revenue, with estimates around $50 billion or more over the long term. Despite this, Nvidia has already removed China-related revenue from its financial projections, so any future sales in China would be considered an upside.
Rasgon highlights the broader implications of Nvidia’s absence from the Chinese market. Every chip Nvidia does not sell in China creates an opportunity for Huawei to fill the gap. Over time, this could lead to Huawei strengthening its position in the AI chip market, which poses a significant competitive threat. While Nvidia’s market capitalization remains strong, the loss of growth opportunities in China is a critical issue that cannot be easily replaced by other markets.
The analyst further explains that the U.S. restrictions effectively hand over the Chinese AI market to Huawei. Although Huawei’s chips may not match Nvidia’s in performance or ecosystem support, the ban encourages Chinese customers to invest in Huawei’s ecosystem, thereby strengthening it. This dynamic could have long-term negative consequences, including the possibility of Huawei expanding its AI chip sales beyond China, which would be detrimental to Nvidia and the broader U.S. semiconductor industry.
Despite these challenges, Rasgon remains optimistic about Nvidia’s growth prospects outside China. He notes that the overall market opportunity for Nvidia is large enough to support continued growth, even with China excluded. Nvidia’s recent financial guidance, which excluded $8 billion in China revenue, still showed strong performance, underscoring the company’s robust position in the global semiconductor market.
Finally, when asked about investment strategies within the semiconductor sector, Rasgon suggests cautious optimism. While some non-AI semiconductor companies like Texas Instruments and Intel are showing signs of cyclical recovery, their valuations are not necessarily undervalued. He continues to favor Nvidia, citing its reasonable valuation and strong market position, especially as supply constraints ease. Overall, he sees Nvidia as well-positioned for growth into the end of the year despite the challenges posed by the China ban.