Nvidia May Exclude China Revenue in Q3 Guidance Amid Export Uncertainty

Nvidia is set to release its latest financial report next Wednesday, with the third-quarter guidance being the focal point for market observers. According to the latest report from KeyBanc Capital Markets, Nvidia may temporarily exclude direct revenue from the China market in its next fiscal quarter's guidance. This decision stems from the uncertainty surrounding the approval timeline for semiconductor export licenses under current U.S. export restrictions.

Analysts from KeyBanc suggest that if the revenue from chips such as H20 and RTX6000D (B40) in the China market were included, it could potentially add 2 billion to 3 billion dollars in incremental revenue for Nvidia. Currently, market expectations for Nvidia's third-quarter revenue stand at 45.92 billion dollars, with an expected earnings per share of 1.01 dollars.

Despite the short-term uncertainties in the China market, Nvidia's business fundamentals remain robust, providing strong support for its long-term growth. KeyBanc's report emphasizes that Nvidia's GPU supply and production capacity are significantly improving, serving as the core driving force behind its sustained performance. Data indicates that Nvidia's GPU supply increased by 40% in the fiscal quarter ending in July, with an expected further 20% increase in supply by the fiscal quarter ending in October, driven by the ramp-up of the B200. Additionally, the more advanced and higher-performing B300 chip is set to begin shipping in October and is anticipated to account for half of the Blackwell series' shipments.

Furthermore, the production efficiency of server racks is also on the rise. The report notes that the manufacturing yield rate for GB200 server racks by server ODM manufacturers has approached 85%, with the expected shipment volume for the year-end reaching 15,000 to 17,000 units. Consequently, the full-year shipment forecast for GB200 server racks has been revised upwards from 25,000 to 30,000 units.

Despite the cautious market sentiment, analysts from KeyBanc and Susquehanna have maintained optimistic outlooks for Nvidia. KeyBanc's analyst has raised the target price for Nvidia from 190 dollars to 215 dollars, while maintaining a "buy" rating. Similarly, Susquehanna's analyst has increased the target price from 180 dollars to 210 dollars, keeping a "positive" rating. However, market reactions have been relatively cautious, with Nvidia's stock price experiencing a slight decline of approximately 2.5% on Wednesday morning.