Nvidia (NASDAQ: NVDA) is facing new headwinds stemming from trade fears related to China, a development likely to impact the company’s financial outlook and, consequently, its share price.
Specifically, reports indicate that the Chinese government is pressuring companies to use locally manufactured chips rather than rely on the American tech giant. This move is primarily viewed as Beijing’s attempt to boost its semiconductor industry to counter U.S. sanctions.
It’s worth noting that the United States has implemented strict export controls on artificial intelligence (AI) chips to prevent China from surging ahead in the AI arms race.
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As such, Nvidia’s stock reacted negatively to the news during the early trading hours on September 30, falling by about 1.7% at some point – to trade below the $120 mark. However, by the close of markets, the NVDA share price had recovered, trading at $122, reflecting modest gains of 0.03% for the day.
Indeed, considering China ranks among Nvidia’s major markets, Beijing’s decision could dampen investor confidence and likely cut into the company’s revenue. For instance, in the first half of fiscal 2025, Nvidia recorded $6.2 billion in sales from China, representing 11% of its total sales.
AI predicts NVDA share price
Therefore, to gain insights into how the trade situation with China might influence Nvidia’s stock, Finbold consulted OpenAI’s brand-new ChatGPT model—o1—to predict how NVDA might trade in the near future.
The AI platform provided three possible scenarios for the NVDA stock. In an optimistic environment, the tool noted that Nvidia would likely rally to new highs if the company manages to mitigate the impact of trade tensions by diversifying its market presence outside of China. In this case, OpenAI o1 foresees the stock rallying to trade from $130 to $140.
On the other hand, in a neutral phase where Nvidia experiences some decline in sales in China but manages to offset this with new product launches, the stock could trade between $115 and $125.
However, if Nvidia faces significant challenges due to a reduced Chinese market share and struggles to compensate for lost revenue, OpenAI o1 predicted that the stock could crash and trade from $100 to $110.
Analysts take on Nvidia
In the meantime, analysts have shared mixed outlooks for Nvidia stock, even though the company has had an impressive run in the AI semiconductor sector. For example, analysts at Bluesea Research warned that Nvidia’s dominance in AI may face turbulence in the coming months due to rising competition and the composition of its client base.
The experts noted that one warning sign regarding Nvidia’s outlook is its highly concentrated customers, which comprise almost 50% of its revenue. To this end, the analysts see Advanced Micro Devices (NASDAQ: AMD) as formidable competition to Nvidia, citing AMD’s projected delivery of $5 billion worth of AI chips in 2024.
“Despite the higher market share of Nvidia, Wall Street could become increasingly cautious about the ability of the company to retain its juicy margins,” Bluesea noted.
Despite this outlook, 42 Wall Street analysts have set an average price target for NVDA at $152 in the next 12 months, with a high forecast of $200. The experts foresee Nvidia plunging to a low of $90 in a bearish scenario.
NVDA stock technical outlook
From a technical standpoint, a stock trading expert using the pseudonym ShardiB2 observed that during the latest trading session on September 30, NVDA exhibited a strong technical rebound, showing resilience as it bounced back from recent lows.
In an X post on September 30, the expert noted that the stock had approached a critical resistance level at $123 before being pushed back, yet it maintained a healthy uptrend. The bounce from key Fibonacci retracement levels suggests renewed bullish momentum.
With the relative strength index (RSI) remaining above 50, signaling bullish sentiment, the analysis suggested that the immediate resistance lies near $128.99, with potential upside if the stock can close above the psychological $125 level.
Meanwhile, as trading expert Alan Santana observed, Nvidia has the potential to drop by 50% to around $61. Santana noted that in recent trading sessions, NVDA has ended at consecutive lower highs, a pattern that often signals possible upcoming downward momentum.
He also noted that the stock has witnessed a consistent drop in trading volume since early March 2024, signaling a potential correction.
In conclusion, Nvidia faces notable challenges due to emerging trade tensions with China and rising competition in the AI semiconductor industry. While some analysts foresee potential growth, others warn of a possible downturn. Despite mixed predictions, investors need to monitor mitigation measures implemented by the company to counter the bearish outlook.
