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CNBC
an hour ago
- CNBC
US senators warn Nvidia CEO about upcoming China trip
A bipartisan pair of U.S. senators sent a letter to Nvidia CEO Jensen Huang on Friday about an upcoming trip to China, warning the CEO to refrain from meeting with companies that are suspected of undermining U.S. chip export controls. The letter from Republican Senator Jim Banks and Democratic Senator Elizabeth Warren asked Huang to also abstain from meeting with representatives of companies that are working with the People's Republic of China's military or intelligence bodies. The senators also asked Huang to refrain from meeting with entities named on the U.S. restricted export list. "We are worried that your trip to the PRC could legitimize companies that cooperate closely with the Chinese military or involve discussing exploitable gaps in U.S. export controls," the senators wrote. Huang planned to visit China on Friday. An Nvidia spokesperson said, "American wins" when its technology sets "the global standard," and that China has one of the largest bodies of software developers in the world. AI software "should run best on the U.S. technology stack, encouraging nations worldwide to choose America," the spokesperson said. In May at the Computex trade show in Taipei, Huang praised President Donald Trump's decision to scrap some artificial intelligence chip export controls and described the prior diffusion rules as a failure. U.S. restrictions in April on AI chips Nvidia modified to comply with export controls to China would reduce Nvidia's revenue by $15 billion, the CEO said. The hardware necessary to power advanced AI is now subject to a bipartisan consensus related to the free export of such hardware, the senators wrote. Advanced AI hardware could "accelerate the PRC's effort to modernize its military," the letter reads. U.S. lawmakers have grown increasingly concerned about efforts to circumvent export controls to China and proposed a law that would force AI chip companies to verify the location of their products. Last month, Reuters reported that a senior U.S. official said the AI firm DeepSeek is aiding China's military and intelligence operations, and sought to use shell companies to circumvent U.S. AI chip export controls to China. Nvidia is planning to launch a cheaper version of its flagship Blackwell AI chips for China, Reuters reported in May. The senators said in the letter they had previously expressed concern that Nvidia's actions could support the AI and chip industries in China and cited Nvidia's new research facility in Shanghai as an example.
Business Insider
4 hours ago
- Business Insider
Alibaba (BABA) Bulls Rejoice as U.S.-China Trade War Nears Ceasefire
Alibaba (BABA) is currently seen as a contrarian growth play among Western investors, mainly due to ongoing U.S.-China trade tensions. However, I believe that sentiment is likely to shift in the coming months, and when it does, Alibaba is well-positioned to be one of the key beneficiaries. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. Now trading around the key psychological level of $100 per share, Alibaba has nearly 50% upside over the next 12 months, according to Wall Street consensus. The message is clear: for investors who believe U.S.-China trade tensions are easing—and that the tariff concerns were overstated from the start—taking a bullish position in BABA stock is a logical move. Buying near the $100 intramonth lows and watching the stock climb toward $150 within a year presents a compelling opportunity for short-medium term opportunistic investors. Alibaba Is a World-Class Investment Right Now When I look at Alibaba today and set aside the macro noise, what stands out is a fundamentally undervalued tech powerhouse. As China's largest tech conglomerate, Alibaba operates across a wide range of high-growth sectors—including e-commerce, cloud computing, digital payments, logistics, and AI-driven services. The valuation case is hard to ignore. Alibaba trades at a forward non-GAAP P/E of just 11, significantly below the sector average of 18. Its forward diluted EPS growth rate is 8.4%, compared to 6% for the broader industry. By traditional metrics, this positions Alibaba as clearly undervalued—a strong foundation for any investment thesis. Add investor sentiment to the equation, and the opportunity becomes even more compelling. Western investors, who control a large share of global capital, have remained hesitant due to ongoing geopolitical tensions and perceptions of anti-Western sentiment in China. But that sentiment may be shifting. The U.S. has reasserted its global influence, and while friction under Donald Trump's second term has been pronounced, recent trade de-escalation and diplomatic signals point toward a possible turning point in U.S.-China relations. If sentiment continues to improve, Alibaba is well-positioned to benefit meaningfully from the rebound. Western Sentiment is Quietly Shifting Major investors have been quietly accumulating shares of Alibaba, signaling growing confidence in the stock despite ongoing geopolitical concerns. Notably, Bridgewater—led by the legendary Ray Dalio—has made Alibaba its fourth-largest holding, now accounting for roughly 3.5% of its portfolio. The market is clearly applying a 'geopolitical discount' to Chinese equities, but savvy investors are choosing to look beyond the headlines and place their bets on a more stable global outlook. I count myself among them. The shift in sentiment is also visible in the data. During the height of Trump's trade war rhetoric in March and April, Chinese equities saw $3.8 billion in outflows. By May, however, that trend had reversed, with $402 million in inflows following signs of diplomatic thawing. According to TipRanks' price data, BABA has outperformed U.S. benchmarks like the S&P 500 (SPX) despite the trade war rhetoric being ramped up every week. Optimism around a so-called 'ceasefire' is very real, and there's reason to believe it could persist. Trump has every incentive to maintain stability with China; a breakdown in diplomacy that leads to a Taiwan conflict would crash the markets and tarnish his legacy. A stable China-U.S. relationship benefits everyone, including investors. From a valuation standpoint, Alibaba remains compelling. A re-rating from its current 11x forward earnings to a more normalized 15–20x range could drive the stock up 50% or more. That's entirely reasonable if Alibaba delivers on the consensus estimate of 15% normalized earnings growth for Fiscal 2027. By comparison, Amazon (AMZN) is forecast to grow EPS by 20% and trades at a forward P/E of 36. If Alibaba can close even a small portion of that gap, it will likely close the valuation gap as well. Sentiment Flips Faster than Fundamentals The reality is, I don't think the market has fully recognized Alibaba's upside potential yet, though analysts clearly have. The valuation re-rating I've been highlighting hasn't materialized, despite early signs that Chinese equities are starting to emerge from the shadows. Alibaba's 35% gain over the past 12 months is impressive, yet the recent 12.5% pullback in the past month presents a compelling entry point. As the saying goes, be greedy when others are fearful. The stock price is currently trading moderately above the 50-week and 200-week moving averages, and the 14-week RSI (Relative Strength Index) is at 45, so this is at the very least fair value, and from the perspective of the fundamentals, a deep undervaluation. That's why I think Alibaba is primed to buy, no matter how you look at it, as long as you can get over the macro fears around the U.S.-China relationship, which has to ease—the alternative is too severe for geopolitical figures to even seriously consider. Diplomacy seems to be the only path forward. What Is the Price Target for Alibaba Stock? On Wall Street, Alibaba has a consensus Strong Buy rating based on 14 Buys, one Hold, and zero Sells in the last three months. BABA's average stock price target of $156.43 indicates a 46% upside potential over the next 12 months. Even the most conservative analyst estimate puts Alibaba at $130, implying nearly 25% upside from the current price of around $105. In other words, it's hard to see a bad outcome here. This is a classic case of a fundamentally strong stock being mispriced due to macro-driven noise. It's Time to Bet Big on China For Alibaba, the main downside risk lies in escalating China-U.S. tensions. However, even in the unlikely event of a full-scale conflict—given ongoing diplomatic efforts—U.S. equities would also suffer significantly. This creates a strong incentive for both nations to maintain peaceful relations, in which case Alibaba stands to benefit over the coming year.
Business Insider
6 hours ago
- Business Insider
Can PayPal Stock (PYPL) Escape its 4-Year Slump?
Since 2021, PayPal Holdings (PYPL) has been a frustrating hold for investors, with its stock price stuck in the proverbial doldrums despite its legacy name and leading position in digital payments. While the stock did peak at over $300 back in 2021, it has hovered — or, more accurately, flatlined — around the $70 mark for four long years, with the lack of growth and rising competition in the fintech space discouraging investors from re-entering the market. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. But with strong free cash flow and shares trading at deep value levels, there are fresh hopes for a rebound. Given the confluence of factors and potential catalysts on the horizon, I am opportunistically Bullish on PYPL stock. Why PayPal Stock is Flatlining The digital payments world is fiercely competitive, and PayPal faces thousands of payment providers that can compete on service and scale. Giants like Apple Pay (AAPL), Shopify (SHOP), and Buy Now, Pay Later (BNPL) players are eating into its market share. Last year, PayPal's revenue grew just 6.8% to $31.8 billion, a slowdown from its earlier high-growth days. Growth stalled further, reaching roughly 2% in Q1, with its transaction take rate dipping to 1.68%, a 6-basis-point decrease, due to a shift toward lower-margin merchants and products. Management's decision to shed unprofitable Braintree volume, anticipating a 5-point revenue headwind in 2025, has also not helped top-line growth. As TipRanks data shows, PYPL's transaction rate has been climbing alongside a stagnant share price since 2021. In addition, PayPal's strategic missteps haven't helped it either. The $4 billion Honey acquisition in 2020 hasn't delivered the e-commerce boost hoped for, with integration falling flat. Then you have geopolitical risks, such as potential U.S. tariffs that would impact less than 2% of branded checkout volume from Chinese merchants, adding uncertainty. However, the most significant long-term headwind will continue to be competition, which remains fierce. Apple's ecosystem and Visa's (V) network effects create barriers, but a company like PayPal struggles to establish a similar type of moat. Signs of Life in a Tough Market On a brighter note, PayPal does boast some wins. In Q1, total payment volume rose 4% on a currency-neutral basis to $417 billion, driven by branded checkout, Venmo, and Braintree. Transaction margin dollars, a key profitability metric, increased 8% to $3.7 billion, celebrating five consecutive quarters of profitable growth. CEO Alex Chriss, on the earnings call, highlighted Venmo's traction, with a 20% surge in revenue and 30% growth in monthly active accounts for debit card and Pay with Venmo features, calling it 'a key engagement driver.' PayPal has also placed some compelling innovation bets. Its Fastlane checkout solution boasts an 80% conversion rate for returning users, streamlining transactions. Partnerships with NBCUniversal, Roku, and StockX are expanding its reach, and 45% of U.S.-branded checkouts now run on an upgraded platform, with Europe targeted for 2025. The Buy Now, Pay Later (BNPL) segment also shone last quarter, with payment volume up over 20% and active accounts up 18%, tapping into a rising market expected in the U.S. Mr. Chriss emphasized the use of AI-driven personalization, stating that they are utilizing AI to enhance support and create dynamic checkout experiences. I think these moves show PayPal is trying to adapt, even if revenue growth lags. A Cash Cow with Deep Value Potential For the time being, PayPal's biggest strength is its cash flow, making it a compelling value play. Last quarter, PayPal generated $1.89 billion in free cash flow, on track for its $6-7 billion full-year target. In the meantime, the company's aggressive share repurchase plan, with $6 billion planned for 2025, or 9% of its market capitalization, demonstrates management's confidence in its undervaluation. The 'buyback yield' is also quite hefty on its own, even if PayPal sees little to no growth from here. Note that since 2022, PayPal's shares outstanding have declined by 17%, which has boosted earnings per share despite revenue challenges. With buyback levels rising against a lagging share price, repurchases are expected to be more accretive over time. In fact, consensus EPS estimates indicate growth of over 10% in 2026 and 2027. Given that analysts tend to be conservative with this stock, earnings growth could significantly surprise the bears over the medium term. Therefore, I believe that at just under 15 times this year's expected EPS, PayPal appears to be priced like a bargain. Even without a strong moat, PayPal's cash generation and buybacks could drive returns. Is PYPL a Buy, Sell, or Hold? Currently, analysts appear divided between bullish and neutral views on PYPL stock, suggesting that some see it as a value play, while others remain skeptical. The stock has a Moderate Buy consensus rating, based on 12 Buy, 14 Hold, and three Sell ratings assigned over the past three months. Today, PYPL's average stock price target of $80 implies roughly 6% upside potential over the next twelve months. A Turnaround Worth Watching PayPal has been weighed down by fierce competition, a lackluster acquisition of Honey, and lagging growth, earning its 'dead money' label. Yet, its most recent quarter showed resilience, with $417 billion in payment volume, decent transaction margin growth, and Venmo's breakout performance. Then, its robust free cash flow and $6 billion in planned buybacks come together to make it a deep value play. If PayPal scales innovations like Fastlane and BNPL while navigating headwinds, it could shake off its slump and reward those betting on its comeback.
