Baird downgrades Nvidia, citing China curbs, Huang worries and slower AI capex growth

Baird downgraded Nvidia on China curbs and worries about AI demand¹. The broker also cited worries about chief executive Jensen Huang and uncertainty around AI².

Baird said AI hyperscaler capex growth could slow to about 40% year-on-year in 2027¹. It expects that slowdown to be held back by supply constraints and early signs of demand softening³. The analyst estimated that hyperscaler capex could rise only 40% year over year in 2027².

The downgrade also pointed to China and to a potential slowdown in AI spending⁴.

Reports of the downgrade emphasised different parts of the case: some led with China curbs and AI demand worries^1,3, while others led with the concerns about Huang².

Why it matters to investors

The analyst described the combination of factors as a perfect storm for Nvidia². Hyperscaler capital spending is the main source of demand for Nvidia’s AI chips, so a forecast of slower growth goes to the core of the company’s outlook^1,2.

The call comes as the scandal around Huang weighs on the stock. Nvidia shares have fallen amid the controversy, pushing Huang from eighth to 10th place on a wealth ranking, below Berkshire Hathaway chairman Warren Buffett and Oracle co-founder Larry Ellison⁵.

China curbs are a separate pressure from the scandal¹. The downgrade ties the two together: policy limits on sales to China, and questions over the chief executive’s position^2,4. Supply constraints are cited as one reason capex growth could slow, which is a different signal from weak demand alone³.

A forecast of about 40% growth is still an increase in spending, but it marks a slowdown in the pace that has supported Nvidia’s sales^1,3. The broker’s view is that the pace of capex growth, not only its direction, now matters for the stock².

What to watch

The clearest test of Baird’s view will be hyperscaler spending plans for 2027, against its estimate of about 40% growth^1,2. Signs of demand softening, which Baird says have begun to appear, will be watched in company guidance³.

Investors will also watch for any change in China export rules^1,4 and for developments in the inquiry around Huang, which Baird cited as a concern².

Whether other analysts follow with downgrades, and whether Nvidia shares continue to fall amid the controversy⁵, will show how widely the cautious view is shared.