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Key Takeaways

• Morgan Stanley named Nvidia its "top pick" among semiconductor stocks Tuesday, a day before the chipmaker's expected earnings release.

• Despite near-term concerns, there is a clear path to "re-acceleration" for Nvidia in the second half of the year, the bank said.

• Wedbush said increased AI spending in the Middle East could mitigate the effects of a U.S. ban on sales of Nvidia's H20 chip to China.

Morgan Stanley named Nvidia (NVDA) its "top pick" among semiconductor stocks Tuesday, a day before the chipmaker's expected earnings release, despite near-term concern over sales to China.

The bank's analysts on Tuesday said potential issues that might trouble investors—like the impact of the Trump administration's ban on the sale of Nvidia's H20 chips to China—are "well telegraphed" and the "path to a [second-half] re-acceleration is clear." Nvidia has said it expects to face a $5.5 billion charge related to the tightened export controls.

The bank affirmed its "overweight" rating and $160 price target, which implies a roughly 22% upside over the stock's closing level last Friday. The analysts said they are "not buying the stock for the [quarter] explicitly, but buying it for what we believe is coming."

Middle East AI Spending Could Fill China Void, Wedbush Says

The impact of tighter export restrictions on China is softened by demand growth in the Middle East, Wedbush Securities analysts said Tuesday. Earlier this month, Nvidia announced a deal to supply chips to a Saudi Arabian startup and reportedly is involved in a deal allowing UAE to import advanced American-made chips.

AI spending from Saudi Arabia and UAE "could help fill the void left by this near-term China uncertainty in Nvidia's future business" and potentially add $1 trillion to the global AI market in the coming years, the Wedbush analysts said. Wedbush's price target for Nvidia is $175, which—unlike Morgan Stanley's—is above the Visible Alpha analyst consensus approaching $164.

Shares of Nvidia rose more than 3% to $135.53 in recent trading Tuesday to move into slightly positive territory for the year.

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