Shares of video solutions semiconductor company Ambarella (NASDAQ:AMBA) took a hit on Wednesday, declining as much as 13.8%. As of 11:34 a.m. EDT, the stock was down 12.9%.
The stock's decline follows a note from Morgan Stanley analyst Joseph Moore (via Bloomberg) saying Chinese video surveillance companies that are clients of Ambarella are at risk of being placed on a U.S. blacklist amid trade tensions between the two countries.
Chinese video surveillance company Hangzhou Hikvision Digital Technology, which Moore estimates makes up between 16% and 19% of Ambarella's total revenue, is at risk of being blacklisted, the analyst argued. Another Ambarella customer at risk is Zhejiang Dahua Technology, the analyst said.
Ambarella's security camera revenue represented about 50% of total revenue in fiscal 2019, the company said in its fiscal fourth-quarter earnings call.
Investors should look for Ambarella management to address these concerns in the company's fiscal first-quarter earnings call on June 4. In addition, if Moore is right about this risk, it may be reflected in the company's revenue guidance provided in the upcoming quarterly update.