Reasons to be bullish about Nvidia stock

A key partner of NVIDIA Corp (NASDAQ:NVDA) today helped to shore up confidence after the Magnificent Seven stock suffered a near $200 billion sell-off due to new US restrictions on exports to China.

Chip foundry Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM) lifted the mood in the sector by reporting a better-than-expected 60% surge in first-quarter profits and reiterating its full-year outlook.

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The Nvidia and Apple Inc (NASDAQ:AAPL) supplier added: “While we have not seen any changes in our customers’ behaviour so far, uncertainties and risks from the potential impact from tariff policies exist.

“We will continue to closely monitor the potential impact on the end market demand, and manage our business prudently.”

TSM shares rose 3% in Wall Street pre-market dealings, while Nvidia looked set for a steadier session after last night’s 6.9% slide left it more than a fifth lower so far this year.

Nvidia’s market capitalisation now stands at $2.5 trillion, behind Apple at $2.9 trillion and Microsoft Corp (NASDAQ:MSFT) with a valuation near $2.75 trillion at last night’s closing bell.

Source: TradingView. Past performance is not a guide to future performance.

The latest setback came after Nvidia revealed that a requirement to obtain licenses to export its H20 chips to China will mean an inventory charge of $5.5 billion in the current quarter.

Morgan Stanley estimates that $5.5 billion of inventory would have driven $12 billion or more in revenues at gross margins approaching 60%.

The bank has taken 8-9% out of its data centre revenue estimates for the next couple of quarters but left its forecasts beyond October unchanged as H20 revenues were set to fall.

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It remains very bullish on Nvidia’s recently-launched Blackwell platform, which unlocks generative AI for the likes of Microsoft, Meta Platforms Inc Class A (NASDAQ:META) and other firms building AI data centres.

The bank said: “We remain focused on the Blackwell ramp as the driver of 2026 earnings power, and our enthusiasm is unchanged. We would not let headwinds in legacy hardware that are out of the company's control dilute that story.”

The stock remains Morgan Stanley’s top pick in semiconductors, with its price target of $162 representing a 54% upside to last night’s closing price.

Advanced Micro Devices Inc (NASDAQ:AMD) also fell 7% on Wednesday after warning of up to $800 million in costs from similar controls. It has said it intends to apply for export licenses but adds “there is no assurance that licenses will be granted".

Despite the latest setback in relations between the US and China, UBS thinks it is more likely than not that a compromise can be reached over coming months.

It said: “While it could take some time, we believe the US and China will walk back from the recent tit-for-tat escalation, and that US-China tariffs will settle at around 34%.

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Chip equipment maker ASML Holding NV (EURONEXT:ASML) yesterday reported lower-than-expected net bookings for the first three months of this year due to tariff uncertainty.

However, Europe’s largest technology stock reiterated full-year guidance and said it still sees 2026 as a growth year on the back of continued strong AI-related demand.

UBS added: “We remain confident in the long-term AI growth story, and believe that big tech companies will continue to plan their capital expenditure on a longer-term basis as AI technology advances.”