Markets hate uncertainty, and the fate of Nvidia’s (NASDAQ:NVDA) H20 chip exports to China had been a big unknown ever since the Trump administration put a halt to these sales earlier this year.
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This was no mere theoretical exercise, as the company ended up taking a $4.5 billion hit related to excess inventory in First Quarter Fiscal 2026. It also goes without saying that the potential for lost revenues in the years ahead was not trivial, with CEO Jensen Huang noting in May that China represented a $50 billion market for Nvidia in the coming two to three years.
Now, however, the issue seems to have reached a potential resolution – albeit via a pricey one for Nvidia. In exchange for export licenses, the company has agreed to pay the U.S. Treasury Department 15% of all China revenues.
Does this mean that Nvidia’s China road will be silky smooth? Not according to one top investor known by the pseudonym The Value Portfolio, who thinks Nvidia’s pathway forward in this lucrative market is not so straightforward.
“Nvidia faces significant headwinds in China,” explains the 5-star investor, warning that the company’s China opportunity is quickly disappearing.
For instance, Value Portfolio points out that Nvidia could find its China sales coming under pressure from local competition. The investor notes that the Chinese government and media are actively encouraging domestic companies to purchase chips from local alternatives such as Huawei, calling into question Nvidia’s long-term revenues in China.
Value Portfolio is also none too thrilled by the 15% export tax, terming it “the Big Brother cut,” and notes that it could significantly trim Nvidia’s H20 margins from 70% to 55% – or a $1 billion hit every quarter. Moreover, the investor questions the legality of this development, throwing doubts about whether it will truly take place.
Looking towards the U.S., while the hyperscalers seem poised to continue their AI capex spending spree for now, this has its limits. Value Portfolio reminds investors that these “technologically advanced companies” don’t have finite resources, are searching for alternatives, and have public ownerships whose patience will be limited.
And yet, despite all these challenges, NVDA’s share price continues its upward climb, and now trades at a Price-to-Earnings ratio of 45x. This is another reason that Value Portfolio is down on NVDA.
“We don’t see a path to the company justifying this sky-high valuation with the additional recent pressures,” concludes The Value Portfolio, who rates NVDA a Strong Sell. (To watch The Value Portfolio’s track record, click here)
Wall Street, on the other hand, sees things very differently. NVDA stock carries a Strong Buy consensus rating based on 35 Buys, 3 Holds, and just 1 Sell. Even so, the Street isn’t forecasting fireworks, with the average 12-month price target of $188.86 pointing to little change from current levels. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.