Baird downgrades Nvidia on China curbs, AI demand worries

The brokerage downgraded the chip giant to "Neutral" from "Buy" and cut its price target to $200 from $500

Nvidia's shares closed at $168.9 on Tuesday and are on track for their biggest weekly drop since March 2025, with uncertainty over top leadership weighing on the stock

The brokerage added that Nvidia shares are likely to remain range-bound in the near term given the investigation into CEO Jensen Huang's relationship with a Chinese businesswoman that is allegedly part of a spying operation

Demand from Southeast Asian data-center operators and China is crucial for the chip company, and any pre-emptive or US government restrictions on exports could weigh on revenues, Baird said

AI hyperscaler capex growth could slow to about 40% year-on-year in 2027, bogged down by supply constraints and early signs of demand softening, it added

Demand for Nvidia's H300 chips outpaces supply; however, due to timing risks, 10-30% of pre-emptive orders could be exposed to potential cuts

Morgan Stanley removed Nvidia from its top pick list after the stock fell more than 25% since being named a top pick a month ago

BofA Global Research also removed Nvidia from its US 1 List and at least three other brokerages, including Wells Fargo and Citigroup, reduced their price targets earlier this week

On the leadership front, Baird said, "The odds of CEO transition are increasing into 2027. We think the odds favor an outsider being hired as CEO versus someone promoted from within"

Nvidia is expected to report third-quarter results after markets close on November 17.