Nvidia: After A 50% Run, Near-Term AI Spending Outlook Remains Uncertain (Rating Downgrade)
Summary
- Since Trump's "Liberation Day," Nvidia rebounded 50% from its April lows on easing trade fears and strong AI demand, now approaching the all-time high.
- Although the company beat 1Q FY2026 estimates, export controls on H20 chips in China led to a $4.5 billion revenue headwind, significantly weighing on margins.
- The 2Q FY2026 outlook indicates the H20 headwind persists, with an $8 billion inventory write-off expected, suggesting margins will continue to decline on a QoQ basis.
- Strong ramps in Blackwell contributed 70% of Datacenter revenue, but macro uncertainty in 2H 2025 poses a potential slowdown in AI spending.
- Trading at 33x non-GAAP P/E fwd, up from 24.5x since my last rating, reflects a risk-on sentiment, but breaking new all-time highs will require more macro clarity in 2026.
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