If there’s anything that could dampen the bullish thesis about Nvidia over the next 18 to 24 months, it’s China.
Lost in enthusiasm for Nvidia’s great quarter and future outlook is an inaccurate warning from China from the company’s top executives.
“Given the strong demand for our products around the world, we do not anticipate that additional export restrictions on our data center GPUs, if adopted, will have an immediate material impact on our financial results. However, in the longer term, the restrictions prohibiting “Moving our data center GPUs to China, if implemented, would result in a permanent loss and an opportunity for American industry to compete and lead in one of the largest markets in the world,” said Colette Kress, Nvidia’s chief financial officer.
China accounts for a large portion of Nvidia’s data center business: 20% to 25%, depending on the quarter, to be exact.
The plea comes as the Biden administration looks to impose new restrictions on China’s ability to access critical technology. This includes restricting the sale of high-end chips that Nvidia sells to power new AI platforms.
Nvidia shares are in no way priced at risk of drying up a large portion of the business, trading at a forward P/E multiple of 61 times. Check out other perfectly priced premium benchmarks on Nvidia from Yahoo Finance.
But maybe there is He should There will be more Chinese risks in Nvidia shares.
The same goes for other major US companies looking to China to boost their growth.
Because the bottom line is that the Chinese economy is sucking wind.
Hong Kong’s Hang Seng Index recently slipped into a bear market. The Chinese yuan is hovering around its lowest level in 16 years. Markets are looking forward to China’s decision-makers offering further interest rate cuts to stem the extreme weakness in the commercial real estate market.
Global investment banks are cutting China’s GDP growth targets below 5%. China’s GDP grew in the second quarter by about 1% compared to the first quarter. And household consumption fell year-on-year by 15% in the second quarter.
It’s all terrible.
“China and its people have suffered greatly during the COVID-19 pandemic, both in terms of lost lives and lost economic output. The analysis suggests that the economic recovery may have begun. But it is fragile. Time will tell if the recovery takes hold or if China declines.” into a cyclical downward spiral.” He said Peterson Institute Fellow Nicholas Lardy.
How did American investors respond to this deteriorating situation in this supposed emerging market? collective yawning.
You saw it in the market action this month. I see that in the stories that people read – and don’t read – on Yahoo Finance. China is not even being brought into the investment equation by many, which is the wrong approach.
Remember, Apple has a big business in China. Starbucks has a big business in China. Walmart imports most of its goods from China and has stores in the country.
If China is slowing down quickly, we’d better believe that will show in the earnings results of the big US companies that US investors love to own. And I realize that it will probably start to show in this quarter.
“China has actually been very slow the last couple of years. So it’s actually at a lower level than what we’ve seen in many years as a result of the very strict coronavirus lockdown and the sluggish economy that we’re seeing in China. So the market for us continues to be very depressed. “We’re expecting some slow recovery but we really don’t see any significant market signs of improvement in China,” Cummins CEO Jennifer Rumsey told me on Yahoo Finance Live (video above).
Heed these warnings about China. do not believe? Then trust the earnings announcement of your favorite stock, Nvidia.
Brian Suzy He is the Executive Editor of Yahoo Finance. Follow Suzy on Twitter @ Brian Suzy and on linkedin. Tips on deals, mergers, activist positions, or anything else? Email brian.sozzi@yahoofinance.com.
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