Baird has downgraded Nvidia to neutral from outperform and cut its price target to $200 from $500, a reduction of 60%.
The new target still implies an 18% rise from Tuesday's closing price.
The move makes Baird one of only three of the 64 analysts tracked by LSEG who do not rate the shares a buy.
The Huang investigation
Analyst Tristan Gerra linked the downgrade to the board's investigation into chief executive Jensen Huang.
Huang has admitted an affair, reportedly with a woman US intelligence officials believe to be a Chinese spy.
Gerra said the rating was likely to stay in place until Washington decides how to respond.
He expects a new ban on exports of Nvidia's H200 chips to China.
That could force Nvidia to write off about $5 billion of chips already shipped to warehouses in Asia, he said.
Gerra also expects new rules to close loopholes that allow chips to reach China through data centres in Southeast Asia.
He warned the US Department of Justice could take action against Megaspeed, a Singapore-based Nvidia customer.
Spending slowdown
Baird forecast that AI spending by the big cloud computing companies would grow by about 40% next year.
It estimated that 10% to 30% of chips ordered in advance could be cancelled if export rules are tightened.
China accounted for 13% of Nvidia's sales in its last reported financial year.
Despite the downgrade, Nvidia shares rose more than 4% in premarket trading.
That was in spite of Morgan Stanley also dropping Nvidia as its top pick in the sector.
AMD and Broadcom shares also gained.
