Since late last month, Nvidia (NASDAQ:NVDA) stock rebounded after a slump in October, possibly due to broader market movements. Investors might be reevaluating concerns that led to the decline, suggesting a potential opportunity for long-term positions in NVDA stock.
Once a gaming industry leader, Nvidia pivoted successfully into the data center, emerging as a top player in AI. With a 100% increase in Q2 revenue to $131.5 billion and data center revenue up 171%, it consistently surpasses market expectations. Despite the short-term challenge posed by the recent AI chip ban by the Biden Administration, its long-term revenue prospects appear unaffected.
Nvidia Creates Three New Chips for China
Nvidia aimed to launch new AI chips tailored for the Chinese market, responding swiftly to tightened U.S. regulations. The chips, named HGX H20, L20 PCIe, and L2 PCIe, were expected to be announced around Nov. 16, prompting a 3.3% rise in Nvidia’s shares.
The chips, housing Nvidia’s latest AI features, underwent adjustments to align with new U.S. regulations, limiting some computing capabilities. Nvidia didn’t comment on the report, and the White House and Commerce Department offered no immediate responses. Last month, Nvidia revealed that tightened export restrictions would impede the sale of two advanced AI chips, A800 and H800, designed explicitly for the Chinese market.
The regulations imposed limits on computing power, introducing a “grey zone” where chips might be allowed to ship to China but require a license. According to Wells Fargo analyst Aaron Rakers, all three reported Nvidia chips seem to stay below absolute power caps, but one is within the grey zone, necessitating a license.
Despite potential positive implications, investors may question Nvidia’s assertiveness in navigating U.S. restrictions, potentially prompting further government actions, according to Wells Fargo analyst Aaron Rakers. Approximately 25% of Nvidia’s data center chip revenue comes from China. The impact of the new rules extends to Nvidia’s high-end gaming chip, the RTX 4090.
Launch of RTX 40-Series on January 2024
Nvidia has sent press invites for a CES 2024 event, sparking speculation about the debut of RTX 40-series Super cards, including the RTX 4070 Super and RTX 4080 Super. The invite doesn’t specify the presenter or mention GeForce, creating anticipation for news on January 8th.
Hardware leaks have disclosed details about the RTX 4080 and RTX 4070 Super cards, with the RTX 4080 Super rumored to feature 20GB of VRAM. These potential Super versions would mark Nvidia’s return to the Super GPU lineup since the 20-series in 2019. Stay tuned for coverage of Nvidia’s keynote and CES announcements on January 8th.
Keep Strong Faith in Nvidia
Beyond the metaverse, NVDA has diverse growth catalysts like AI, blockchain, and gaming. The stock rebounded from concerns about U.S. restrictions on AI chip exports to China and high-interest rates, suggesting a promising future.
Nvidia has both short-term rally potential and significant long-term upside. Continued domination of the AI chip market and demand recovery for PC and gaming chips positions the company for outstanding earnings growth. Forecasts suggest surpassing $500 per share soon and reaching $600, $750, or more per share by FY2026. With rebounding sentiment, NVDA stock appears as a strong long-term buy at current prices for investors with a similarly long investing time horizon.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
