As Nvidia gears up for its upcoming earnings report, Wall Street is keeping a close eye on how recent tariffs and restrictions on chip sales to China could impact the tech giant's performance. Analysts from DA Davidson caution that these constraints may linger as an "overhang" until new regulations are firmly in place.

Recent export restrictions imposed by the Trump administration on Nvidia's H20 chips have already forced the company to anticipate a whopping $5.5 billion write-down in its first-quarter earnings.

At the Computex Taipei tech conference held on May 21, Nvidia CEO Jensen Huang revealed a staggering drop in the company's market share in China, plummeting from 95% to just 50% over the past four years. Huang criticized current U.S. chip export rules, asserting that they have unintentionally bolstered Chinese firms and described the efforts as a "failure."

In a strategic move, Nvidia is reportedly planning to kickstart mass production of a lower-powered AI chipset aimed at the Chinese market as early as June, responding to the shifting landscape.

Revenue Predictions: Mixed Bag Ahead?

Piper Sandler analysts anticipate that Nvidia will struggle to meet revenue expectations this quarter, citing uncertain economic conditions, the impact of tariffs, and the ongoing ban on its H20 chip in China. They predict Nvidia's performance may be flat to down ahead of the earnings release.

However, there's a silver lining. The firm believes Nvidia could rebound in the second half of the year thanks to increased capital spending from other tech companies and a more favorable economic climate. "We advise investors to endure this period of uncertainty and maintain a long position in Nvidia," they suggested.

Investor Concerns: Reliance on a Small Clientele

Despite the potential for recovery, investors are increasingly worried about Nvidia's heavy reliance on a limited number of major clients, primarily within Big Tech, which have accounted for over half of its data center revenue amidst the AI boom. Yet, there are signs this dependency could be shifting.

Nvidia is reportedly intensifying efforts to secure deals with governments looking to develop sovereign AI capacities, potentially broadening its customer base and decreasing its reliance on West Coast tech firms.

Analysts' Spin: Keeping the Faith Amidst Challenges

Bank of America projects that while Nvidia will likely experience a "modest" sales beat for the first quarter, guidance for the current quarter could prove "messy," particularly due to the impact of tariffs on shipments. They estimate Nvidia may face a $4 billion to $5 billion headwind in shipments from China, leading to a revised sales forecast of $41 billion, down from the original $46 billion consensus.

Nevertheless, BofA remains optimistic, noting the company's unique position in the global AI deployment cycle and the possibility of recovering China sales with redesigned, compliant products expected later this year. Their target price stands at $160 per share, indicating a robust 19% upside.