To The Moon

On Friday, President Donald Trump met with Nvidia ( $NVIDIA(NVDA)$ ) CEO Jensen Huang at the White House to discuss AI policy and the role of Nvidia’s advanced computer chips. The meeting, arranged weeks ago, aimed to facilitate a conversation between the two leaders on AI development. Nvidia's stock opened 3% higher on Friday but closed down, reflecting mixed investor sentiment.

Meeting Details, Responses and Reactions

The meeting between Trump and Huang focused on several key issues, including AI policy, export controls on advanced AI GPUs for China, and the future of U.S. technology and AI leadership. Nvidia, based in Santa Clara, California, designs and supplies advanced computer chips integral to AI development. The company had previously protested a move by the Biden administration to expand AI chip restrictions to over 100 countries, including Singapore.

Trump's administration has signalled a continuation and potential hardening of these export controls, which could impact Nvidia's ability to compete globally. The meeting also discussed the performance of China's DeepSeek AI technology, which was developed using Nvidia's lower-performing H800 chips.

Reports focused on Nvidia's pivotal role in AI and the implications of tightening export controls, with outlets like PCMag and Bloomberg discussing potential policy shifts.

Social media responses oscillated between optimism for policy influence and scepticism, with some humorously speculating on Trump's interest in Nvidia's products.

Nvidia's stock price opened 3% higher on the meeting day but closed down. The company's current market cap stands at $3.05 trillion, with a 52-week high of $153.13 and a low of $60.70.

Impact on Nvidia

1. Sales in the Chinese Market: Nvidia derives a significant portion of its revenue from China, with figures suggesting that 15% to 20% of its data centre revenue comes from this market. Including the "invisible" chips entering China through third countries, Nvidia's actual sales could be even higher. Official reports indicate that China represents up to 17% of Nvidia's sales, highlighting the critical nature of this market for Nvidia's financial health.

2. Potential Impact of Further Export Restrictions:

• Revenue Impact: Tightening export controls would directly reduce Nvidia's sales volumes in China, affecting quarterly revenues. If high-end chip sales are further restricted, Nvidia could lose billions in sales, considering its current revenue share from China.

• Financial Implications:

  Profit Margins: Trump has pledged to impose tariffs of up to 100% on foreign semiconductors, including those from Taiwan, which could significantly impact Nvidia's production costs and pricing. These tariffs are intended to incentivize domestic production but could lead to higher prices for consumers and reduced competitiveness for Nvidia.

  Strategic Shifts: Nvidia might accelerate plans for U.S. or alternative manufacturing to circumvent restrictions, though this involves significant investment and time.

3. Stock Price Evolution:

• Short-term Volatility: The stock has shown sensitivity to policy news, with immediate reactions reflecting both hope and fear.

• Long-term Outlook:

  Negative if Unchanged: Without adaptation, Nvidia's stock could see prolonged pressure from reduced market access in China and increased costs from tariffs.

  Positive with Adaptation: If Nvidia can leverage policy changes or find alternative markets, there might be a recovery or even growth, contingent on strategic execution.

4. Investor Sentiment: Investor sentiment remains cautious, with some analysts predicting that Trump's policies might benefit Nvidia in the long run. However, the current uncertainty surrounding the meeting's outcome and the impact of tariffs on Nvidia's finances has led to a wait-and-see approach.

Conclusion

While Jensen Huang's meeting with President Trump could lead to positive outcomes for Nvidia, such as policy support and increased market confidence, the challenges the company faces are significant. The potential tightening of export controls and high tariffs on imported chips could impact Nvidia's production costs, pricing, and competitiveness. As a result, the meeting alone may not be enough to resolve all of Nvidia's urgent issues.

This analysis is based on the current information available and is only a preliminary assessment. Further evaluation will be necessary as the situation develops and more information becomes available.

@TigerWire