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Analysts issue rare warning on Nvidia stock before key earnings

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AI chipmaker Nvidia (NVDA) is set to report first-quarter earnings on Wednesday, May 28.

Nvidia is the leading supplier of graphics processing units, which are essential for artificial intelligence. Its stock surged 171% last year and nearly 239% in 2023, as investors bet on its dominant role in the AI boom.

While Nvidia’s growth remains strong compared to other tech giants, its pace is slowing.

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The company expects to report about $43 billion in first-quarter revenue, a 65% increase from a year earlier. That is a sharp slowdown from the 262% growth in the same period last year.

In February, Nvidia posted better-than-expected fourth-quarter results, but its stock dropped 8.5% after reporting a narrowed gross margin. The company attributed this to newer data-center products that were more complicated and costly.

Nvidia stock continued to struggle in March and early April, dragged down by tariff uncertainties. However, the stock has rallied over the past month.

Nvidia stock closed at $131.29 on May 23 and is down 2.23% year-to-date.

Image source&colon; Chih/Bloomberg via Getty Images

Nvidia faces new reality in China market

Just ahead of its next earnings release, Nvidia is benefiting from the U.S. decision to scrap the Biden administration’s AI diffusion rules, which would have restricted the sale of its chips to certain countries.

Nvidia also became a key topic during President Donald Trump’s trip to Saudi Arabia in May. The company said it will supply several hundred thousand AI processors to Humain, an AI startup backed by the Saudi sovereign wealth fund, over five years.

Related: Nvidia CEO shares blunt message on China chip sales ban

The AI Diffusion Rule, introduced in January 2025, was designed to restrict advanced AI chip exports to countries such as China. But it drew criticism from companies including Microsoft (MSFT) and Oracle (ORCL) , which argued the limits would hurt U.S. businesses in markets like India and Switzerland while doing little to block China.

Although the rule has been scrapped, the U.S. is still tightening export controls to curb China’s access to advanced AI chips.

In April, Nvidia said it would take a $5.5 billion charge to export its H20 chips to China and other countries, citing higher costs under new export rules set by Trump. The company also said it now needs a government license to ship the chips.

China remains a key market for Nvidia, making up 13% of its sales in the past financial year. To adapt to the new rules, Nvidia plans to launch another cheaper AI chip for the Chinese market, with production expected to begin as early as September, according to Reuters.

Meanwhile, Chinese companies like Huawei are speeding up the development of homegrown AI technologies, reducing dependence on U.S. hardware.

Nvidia’s market share in China has dropped from 95% before 2022, when export restrictions began, to 50% now, CEO Jensen Huang said in Taipei last week.

He also warned that more Chinese customers will turn to Huawei chips if U.S. export curbs continue.

Investors will closely watch Nvidia’s profitability, outlook, and any comments on chip production and exports in the upcoming earnings report.

Bank of America warns of “messy” Q2 guidance

Bank of America has updated its views on Nvidia stock ahead of the earnings. It reiterated a buy rating with a price target of $160, according to a research report on May 23.

The analysts said Nvidia faces near-term headwinds of the U.S. government’s chip sales curb to China. However, the stock remains a “top pick” given its “unique leverage to the global AI deployment cycle, and possibility for China sales recovery on new redesigned/compliant products later in the year.”

Related: Analysts double price target of new AI stock backed by Nvidia

Still, the firm flagged risks of a “messy Q2 guide.”

“NVDA could guide FQ2 to as low as $41bn, below recently lowered ~$46bn consensus,” the analysts wrote, adding that this could imply an earnings per share of 85 cents, or 16% below consensus.

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