Move over, Jimmy Stewart. Jensen Huang’s got this one covered.
In the classic 1939 film “Mr. Smith Goes to Washington,” Stewart portrays Jefferson Smith, a naive, newly appointed U.S. senator who takes on government corruption.
While nobody is likely to call Huang naive, the co-founder and CEO of AI-chip juggernaut Nvidia (NVDA) spoke bluntly about the Trump administration’s ban on sales of the company’s H20 chips to China. That prompted Wedbush analysts to issue a research note titled “Mr. Huang Goes to Washington.”
“China is one of the world’s largest AI markets and a springboard to global success,” Huang said during the company’s earnings call. “With half of the world’s AI researchers based there, the platform that wins China is positioned to lead globally.”
He wasn’t kidding. A recent Morgan Stanley report found that China’s AI industry and related sectors could grow into a market valued at $1.4 trillion by 2030.
U.S. export controls could create barriers for AI development in China but won’t stop its progress, the investment firm said, noting that “AI is at the center of business priorities, consumer behavior and economic growth in China.”
Nvidia CEO Jensen Huang said ‘export restrictions have spurred China’s innovation and scale.’Image source: SOPA Images/Getty Images
“Today, however, the $50 billion China market is effectively closed to US industry,” Huang said. “The H20 export ban ended our Hopper data center business in China. We cannot reduce Hopper further to comply.
“As a result, we are taking a multibillion-dollar write-off on inventory that cannot be sold or repurposed. We are exploring limited ways to compete, but Hopper is no longer an option. China’s AI moves on with or without US chips. It has to compute to train and deploy advanced models.”
“The question is not whether China will have AI; it already does,” Huang said. “The question is whether one of the world’s largest AI markets will run on American platforms.”
“Shielding Chinese chipmakers from US competition only strengthens them abroad and weakens America’s position,” he noted. “Export restrictions have spurred China’s innovation and scale.”
The Morgan Stanley report said that over the next five years, China aims to achieve full independence from foreign countries in its AI development.
Since it’s subject to U.S. export restrictions, the report said, the nation is prioritizing more efficient and less expensive AI technologies, most notably DeepSeek. That’s the Chinese startup that shivered the tech world’s timbers back in January with an AI model that was reportedly much cheaper than those of its American counterparts.
“The US has based its policy on the assumption that China cannot make AI chips,” Huang said. “That assumption was always questionable and now it’s clearly wrong. China has enormous manufacturing capability.”
Wedbush, which reiterated its $175 price target and outperform rating on Nvidia shares, said the company executed well despite the loss of H20 representing a greater headwind than the investment firm and investors expected.
“While NVDA did talk to the significance of the lost opportunity in China,” the investment firm said, “Jensen also appeared to make a concerted effort to credit the current administration for recent sovereign deals, talk to NVDA’s plans to further US investment (a key touch point for President Trump), while also suggesting management has faith in the US government’s likely future actions with regards to trade and AI.”
Wedbush said this approach was likely best suited to minimizing potential political headwinds for Nvidia. But “it also highlights that political decisions (AI diffusion, tariff, and China policies) are seemingly the only potential significant stumbling blocks for NVDA over the next 12+ months.”
DA Davidson boosted its price target on Nvidia to $135 from $120 and affirmed a neutral rating on the shares, according to The Fly.
The Q1 results were mixed, with better-than-expected revenue numbers but a notable impact from the lack of H20 sales into China in Q1 and Q2, the firm said.
The firm said Wall Street was underaccounting the Chinese contribution to Nvidia revenue and that this topic represents the largest overhang on the stock. Davidson said this will continue until the Trump administration provides an official position that resolves the matter in one direction or the other.
Stephen Guilfoyle says Nvidia’s results were impressive and “much, much better than feared given the mid-quarter change in the restrictions on what kinds of technology can be exported to China and other nations.”
“This pressured sales, suppressed margins and forced the firm to take an inventory-related charge against these earnings that fortunately was smaller than what the firm had warned it might be,” he said.
The veteran trader, whose career dates back to the 1980s on the New York Stock Exchange, reiterated his stock price target of $165 on NVDA.
“What’s clear is that demand for all things AI-related has not let up in the least,” Guilfoyle said. “What’s also clear is that the Chinese market makes a material impact on the firm’s overall performance. Cash flows are golden, and the balance sheet is simply fortress-like.”
