Nvidia (NASDAQ:NVDA) is a market giant whose earnings never fail to attract attention – and that will be the case again on Wednesday, when the company reports results for its fiscal first quarter (April quarter).
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This time, though, the report comes with some extra spice: the U.S. government’s recent ban on H20 chip sales to China has introduced a variable into the mix, raising new questions about demand dynamics and geopolitical risk.
In light of this, and drawing on new insights from recent supply chain and investor conversations, as well as Nvidia’s remarks at the recent Computex tradeshow, Bank of America analyst Vivek Arya has been reassessing the potential impact on the chip giant.
“Specifically,” says the 5-star analyst, “we flag the disconnect between NVDA’s ‘$15bn in lost China sales’ with the lower $10-$12bn recent revision in our/investors’ FY26/CY25E sales expectations, and even lower $3.8bn in consensus revisions.”
Moreover, depending on Nvidia’s original schedule for China shipments (possibly weighted toward the first half), Arya thinks this gap could widen to a $4-$5 billion headwind in FQ2.
Indeed, FQ2 (July quarter) consensus expectations have already slipped from $48 billion (pre-H20 ban) to $46.4 billion, though Arya believes investor expectations may be closer to $45–46 billion. Yet, even these figures reflect only about a $2 billion H20-related headwind, an assumption Arya deems overly optimistic. As a comparison, AMD recently estimated that around 47% (or $700 million) of its $1.5 billion total CY25 China-related impact would hit in CQ2. Applying that same 47% ratio to Nvidia’s projected $15 billion full-year China headwind suggests a potential ~$7 billion hit to FQ2 sales versus the original $48 billion target.
“In other words,” Arya went on to add, “NVDA could guide FQ2 to as low as $41bn, below recently lowered ~$46bn consensus. The $41bn sales guide would also imply pf-EPS closer to 85c, or 16% below new consensus.”
As for FQ1, Arya anticipates a “modest Q1 beat” vs. the company’s $43 billion guide and the $43.4 billion expected on Wall Street. While Nvidia guided gross margins at 71%, Arya expects the $5.5 billion inventory write-off tied to the H20 ban to drag GM down to approximately 58%, a headwind that is likely not yet factored into consensus. Arya thinks pf-EPS is expected to land closer to $0.74, versus the Street’s $0.88 forecast. The analyst does not anticipate the impact of the China H20 restrictions in FQ1 with any pull-forward of demand supporting the headline beat but “unlikely to help investor sentiment.”
All told, looking at the bigger picture, the current issues don’t affect Arya’s overall bullish stance.
“Despite these near-term headwinds we maintain Buy on NVDA, a top sector pick given its unique leverage to the global AI deployment cycle, and possibility for China sales recovery on new redesigned/compliant products later in the year,” the analyst summed up.
That Buy rating is accompanied by a $160 price objective, suggesting the stock will gain 22% over the coming months. (To watch Arya’s track record, click here)
Most of Arya’s colleagues are thinking along the same lines; based on a mix of 32 Buys, 4 Holds and just 1 Sell, the analyst consensus rates the stock a Strong Buy. At $164.51, the average price target implies shares will gain 21% in the months ahead. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.