Wall Street's 2023 AI darling has hit a speed bump.
On Tuesday, the Biden administration announced plans to halt shipments of select AI chips from American companies like Nvidia (NVDA) to China. Nvidia stock fell nearly 5% on the news and slumped more than 2% in early trading on Tuesday.
Analysts at Citi believe there is a "low likelihood" of the US government granting export licenses to Nvidia, prompting the firm to lower its sales estimates for fiscal year 2025 and 2026.
"We believe the scope of the new performance density thresholds will make it difficult for NVIDIA to sell to China," Citi analyst Atif Malik wrote in a research note on Monday.
Citi moved its 12-month price target down to $575 from $630 on the news but maintained a Buy rating on the chipmaker, citing "secular AI growth which remains in early innings."
Nvidia is off about 12% from its 52-week high, which it briefly touched around after reporting another quarter of blowout sales in late August.
Nvidia's current quarter is set to end on Oct. 29 and the company doesn't believe the new ruling from the US government will impact this quarter's financial results given the "strength of demand" for Nvidia products worldwide, the company said in an SEC filing on Tuesday.
It could, however, impact growth beyond this quarter.
"The licensing requirement may impact the Company's ability to complete development of products in a timely manner, support existing customers of covered products, or supply customers of covered products outside the impacted regions, and may require the Company to transition certain operations out of one or more of the identified countries," Nvidia wrote in the filing.
The company also noted that while it can apply for licensing, there is no guarantee those are granted or that the US government will "act on the request in a timely manner."
Josh Schafer is a reporter for Yahoo Finance.
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