The chip stock is on track to snap a four-week streak of gains. Bank of America analysts say next week's earnings report could include 'messy' guidance.
Shares of Nvidia Corp. were down 1.6% in midday trading on Friday, putting them on track see a streak of four straight weekly gains snapped. With the company expected to report first-fiscal-quarter earnings next week, some analysts are pointing to trade pressures that could put its guidance at risk.
The chip manufacturer's stock ended the previous week up 16%, but midway through the Friday session it was set to finish this week down 1.9%.
Mizuho Securities desk-based analyst Jordan Klein said in a note ahead of Friday's open that while chip stocks have had "a great run over [the] past 5 weeks" due to the U.S. and China agreeing to a 90-day pause on reciprocal tariffs, he was expecting investors to do some selling.
"Not saying everyone dumps Semis today, but many of the stocks rallied so much that the near-term risk reward no longer looked favorable in my eyes into mid yr.," Klein said in the note.
Bank of America maintained its buy rating on Nvidia's stock (NVDA) in a note on Friday but warned the company could issue "messy" guidance for the July quarter given U.S. restrictions on its business in China.
In April, President Donald Trump banned Nvidia from selling its specially designed H20 chip to Chinese customers. The company said in a regulatory filing the same month that it expected charges of up to $5.5 billion in the April quarter from the rule.
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Nvidia Chief Executive Jensen Huang called the ban "deeply painful" in an interview with Stratechery published on Monday and said Nvidia "walked away from $15 billion of sales" and "$3 billion worth of taxes."
Vivek Arya, an analyst at Bank of America, said investors are waiting for Nvidia to show confidence that its gross margins will recover to somewhere in the mid-70% range in the second half of the year, which would reflect the ramp of its Blackwell platform.
Still, Arya called Nvidia's stock "a top sector 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."
Bank of America is expecting a "modest" beat for the April quarter and expects the $5.5 billion write-off from the H20 ban to pull gross margins down to about 58%, while Nvidia's guidance, issued before the China rule change, was for 71%.
For the July quarter, analysts tracked by FactSet are looking for $46 billion in revenue. The Bank of America analysts lowered their own expectations to $46.4 billion from $48 billion, with the prior estimate dating back to before the H20 ban.
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-Britney Nguyen
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