Stacy Rasgon, Bernstein senior semiconductor analyst, joins 'Squawk Box' to discuss Nvidia's rally to a $4 trillion market cap, the ban on sales to China and what's next for the semiconductor sector.

Nvidia recently reached a $4 trillion market cap, but ongoing U.S. restrictions have effectively barred the company from selling advanced chips to China. According to Bernstein senior semiconductor analyst Stacy Rasgon, this ban is costing Nvidia billions in lost opportunities and is handing the Chinese AI market to domestic competitor Huawei.

Rasgon notes that while Huawei's products are not yet on par with Nvidia's, the ban encourages Chinese customers to invest in Huawei's ecosystem, potentially strengthening it over time. Despite these challenges, Nvidia's overall market remains large enough for continued growth, and the company's financial outlook remains strong even with China excluded from its projections.

Nvidia China ban hands country's AI market to Huawei: Stacy Rasgon

NVIDIA, the first publicly traded company to hit the $4 trillion market cap at yesterday's close, is down slightly this morning ahead of the opening. Joining us now for more on NVIDIA's rally and what is next for the chip sector, Stacey Raskin, Bernstein Senior U.S. Semiconductor Analyst. Stacey, great to see you. Good to be here. He made the trip to President Trump ahead of his trip to Asia to meet with Chinese officials. I'm wondering, how do you read that? Do you think he's still pressing his case for access to China, which they're effectively shut out of? I mean, I'm sure he's pressing his case, like I think he has to. And they are shut out. This is the negative and the positive. The negative, it is costing them many billions of dollars in lost opportunities. I think he said something like it could be $50 billion. And frankly, it's probably more, like over the long term, if the market is as big as we think it is. At the same time, they've also zeroed it out of their numbers. So to the extent that they can either, you know, convince Trump to relax some of these kind of constraints, or to the extent that they can work around them, you know, lowering the performance below like the new thresholds, anything that they get in China going forward from here would be upside, because they have taken it completely out of the model. So walk us through. I mean, if you are to take out those numbers, fine, like you can take out the numbers now. But there is sort of this bigger compounded impact in the future for every chip they don't sell. Huawei is selling that chip instead. And that just gets compounded even more and more and more. So how do we think about NVIDIA at a $4 trillion market cap and going higher, probably, but without the China growth story? Where does that get replaced? Yeah. You bet. And fortunately, the market is probably big enough where they can still grow really well even without China. However, it's not like that China business would get back. And I made that point, you know, on this channel. With the nature of the new constraints, effectively, you are handing the Chinese AI market over to Huawei if NVIDIA is not allowed to sell there. I mean, Huawei has parts. They're not as good as NVIDIA's. They don't have the ecosystem. Even with the lower performance of the NVIDIA parts, given the thresholds, the Chinese customers would still rather use them because of those ecosystem benefits. If you're completely banning them, you're encouraging not only you're driving sales to Huawei, but you're also encouraging local customers to start to invest in that Huawei ecosystem and it strengthens it. So these are not good things. The longer term worry would be, does Huawei start to build that ecosystem and then try to sell the stuff out of China? Like that would that would be bad. And so, again, Jensen was very clear, actually, he spent a lot of time three months ago or two months ago on the last earnings call laying all of this out explicitly. I'm assuming he was giving the message to the administration. So, yeah, I think the market's plenty big enough for them to grow. But I mean, it's unfortunate if they're not allowed to sell into China. That is a market that's big and, you know, they wouldn't be able to replace it there. Fortunately for them, though, especially in the near term, you know, when they guided that, they dropped eight billion dollars out from China and their numbers were still fine. It just kind of gives gives you an idea for how big the overall market and opportunity is for them. A last quick question, Stacey, and that is, you know, in terms of within the sector, within your coverage universe, is it time to start rotating into some of the more undervalued chip names or is that still too early? We are seeing sort of this churn and we're seeing the non AI chips, Texas Instruments, Intel. They're starting to gain here a little bit now. I wouldn't necessarily call the non-AI semis undervalued. You mentioned Texas Instruments. I mean, it's I don't know, 36 times earnings or whatever it is. I think TI may be the most expensive stock in my coverage. However, let's say. Yeah, but there are, you know, there are people that are playing like cyclical recovery in some of these things like TI and some of the other analogs. And it does look like we're seeing some cyclical recovery now, whether that's real cyclical recovery or just inventory stocking or just tariff pull forward, we don't know. But there has been a play to go in there. I personally still do prefer the AI names. I still like NVIDIA. I think, again, with China sort of zeroed out and the Blackwell supply constraints kind of eased, I think things look pretty good in there, especially in the year end. And NVIDIA's valuation right now is not aggressive at all. I think it's, what is it, mid to upper 20s on next 12 month earnings. It's very inexpensive, if you believe the numbers. Stacey, great to see you. Thank you.

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Jerusalem

Middle East Conflict

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Kyiv

Ukraine Invasion

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Tel Aviv-Yafo

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Camarillo

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Washington

Global Tariffs

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Texas

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Kuala Lumpur

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Ventura County

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Los Angeles

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San Francisco

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Moscow

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Kerr County

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Sana'a

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Marseille

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Cernadilla

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