Nvidia's Stock Tumbles Amid AI Chip Export Restrictions and Market Concerns

Nvidia Investors Balk at Beaten Down Valuation as Risks Mount

Nvidia Corp. shares are trading near their lowest valuation of the artificial intelligence era, but a growing list of perils has investors cautious about taking advantage of the dip. The latest shock for the chipmaker came after saying last week US authorities have barred it from selling the H20 chip line in China, a move that will cost it billions of dollars. The news added to concerns that spending on AI could be poised to slow, especially as the escalating trade war further clouds overall prospects for economic growth.

Prediction: 8 Wall Street Analysts Lowered Nvidia's Price Target Last Week -- and This Is Just the Beginning | The Motley Fool

The unbridled optimism for Wall Street's artificial intelligence (AI) darling is starting to sour. For more than two years, no trend has captivated the attention of investors quite like the evolution of artificial intelligence (AI). The ability for software and systems to reason, act, and potentially even evolve to learn new skills, all without the aid of human intervention, gives this technology a seemingly limitless ceiling. According to PwC's Sizing the Prize, AI can add $15.7 trillion to the global economy by 2030 through a combination of productivity improvements and various consumption-side effects. This is a massive addressable market, with no company benefiting more in the early going than semiconductor colossus Nvidia (NVDA -4.36%). In short order, Nvidia's Hopper (H100) graphics processing units (GPUs) and Blackwell GPU architecture grabbed hold of a monopoly like share of the AI-GPUs used in high-compute data centers. Overwhelming demand for the company's hardware, coupled with AI-GPU scarcity, led to exceptional pricing power and a generally accepted accounting principles (GAAP) gross margin that hit 78.4% during the fiscal first quarter of 2025 (ended April 28, 2024). But over the last week, Wall Street's optimism for its AI darling has noticeably soured -- and, in my view, this is likely just the beginning. While commentary from Wall Street analysts is often fluid, their price targets act as anchors that help investors gauge their longer-term sentiment toward a company. Last week, eight Wall Street analysts cut their price target on Nvidia: A majority of these price target adjustments occurred after Nvidia released a regulatory filing on April 15 where it disclosed a potential hit of up to $5.5 billion tied to exports of its high-powered H20 chips to China. Nvidia noted it would need to obtain a special license to export the H20 chip to the world's second-largest economy by gross domestic product. However, this filing shouldn't be a surprise. For three years prior to Donald Trump taking office the Joe Biden administration clamped down on the export of AI-accelerating chips and equipment to China. The Biden administration added the A800 and H800 chips to the restricted export list, which are AI-GPUs Nvidia had developed specifically for the Chinese market. While some investors might be looking at this slip-up as the ideal opportunity to snag shares of Wall Street's Ai darling on the cheap, there's a realistic possibility we're witnessing the beginning of a wave of analyst price target cuts for Nvidia. Although Wall Street analysts tend to be reactive rather than proactive most of the time, the telltale figure that strongly suggests price target cuts are going to become something of the norm for Nvidia is its GAAP gross margin. As noted, a perfect storm of demand and limited supply allowed Nvidia to charge north of $40,000 for its Hopper chip early last year. This resulted in the aforementioned GAAP gross margin of 78.4%. But in each subsequent quarter, Nvidia's GAAP gross margin has declined: This decline reflects both an increase in competition within AI-accelerated data centers, as well as a decrease in AI-GPU scarcity. While most investors remain laser-focused on direct competitors to Nvidia's data-center dominance, its biggest threat has come from within. Most members of the "Magnificent Seven," which happen to be some of Nvidia's top customers by net sales, are internally developing AI-GPUs and solutions of their own. Even though these chips won't be sold externally, and they're likely to be slower than Nvidia's hardware on a compute basis, they're considerably cheaper than Nvidia's AI-GPUs, and there's no backlog. Nvidia is poised to lose data center real estate to these internally developed chips with each passing quarter. In turn, I expect this to steadily minimize AI-GPU scarcity and reduce the pricing power that's fueled the parabolic climb of Nvidia stock. A second issue that's likely to cause Wall Street's price targets for Nvidia to move lower is its product replacement cycle. Normally, innovation is everything in the tech sector. Nvidia's Hopper and Blackwell chips are the clear leaders in compute speed in AI-accelerated data centers. It's why we've witnessed Nvidia's full-year sales skyrocket from $27 billion in fiscal 2023 to north of $130 billion in fiscal 2025. However, Nvidia's expediency of innovation, and its desire to maintain its lead in compute capacity, may not sit well with its current or prospective customers. After introducing the Hopper, Nvidia began rolling out Blackwell late last (calendar) year. Next in line is the Vera Rubin GPU architecture, which is expected to debut in 2026, followed by the Vera Rubin Ultra in the second-half of 2027. Both Vera Rubin chips will feature the all-new Vera processor. But bringing a new AI-GPU to market annually comes with a cost. Previous buyers are likely to see the value of their AI hardware investments rapidly depreciate. Additionally, the improvements observed in compute capacity, high-bandwidth memory, and energy efficiency from one year to the next is likely to diminish over time. In other words, there's less of an incentive for Nvidia's clients -- especially its biggest customers -- to invest aggressively in the latest hardware. Last but certainly not least, history is likely to drag Wall Street's price targets on the company considerably lower. For much of the last 30-plus years, investors have had a next-big-thing technology or innovation to captivate their attention. Though each of these trends offered juicy addressable markets, the one factor they've all shared was an eventual bubble-bursting event. Beginning with the internet in the mid-1990s, every next-big-thing trend has navigated its way through a bubble. The reason bubbles form is simple: investors overestimate the early stage adoption and/or utility of a new technology or innovation. At some point, lofty investor expectations fail to be met, which leads to the bubble bursting. Although Nvidia has enjoyed stellar demand for its AI hardware, what can't be ignored is that most businesses investing in AI have yet to optimize their solutions or generate a positive return on their investments. We're witnessing all the same telltale signs that investors have overestimated the early adoption and real-world use cases of artificial intelligence. The good news is that many of these game-changing trends went on to be successful. But the undeniable reality is that every next-big-thing technology/innovation needs plenty of time to mature. AI isn't anywhere close to being a mature technology, as of yet. Considering that Nvidia has benefited more than any other public company from the rise of artificial intelligence, an eventual bubble-bursting event would, in all likelihood, hit it harder than other AI stocks.

Nvidia Has Now Lost More Than $1.3 Trillion in Market Cap. Is It Finally Time to Buy the Stock? | The Motley Fool

Rampant uncertainty regarding the future of AI has battered the chipmaker. If investors had to choose just one company that exemplifies both the opportunities and risks associated with recent advances in artificial intelligence (AI), Nvidia (NVDA -5.59%) would be a logical choice. The company's graphics processing units (GPUs) have been the linchpin that powered the AI revolution and fueled Nvidia's atmospheric rise, as the stock gained more than 800% in just two years. However, it has since suffered a stark reversal of fortune, plunging 36% (as of this writing) and shedding more than $1.3 trillion from its market cap since earlier this year. After a slump of this magnitude, is it finally time to buy the stock? Several factors have contributed to Nvidia's downfall in recent months. China's DeepSeek, a high-performance AI model, was created without the benefit of Nvidia's state-of-the-art GPUs. This marked the beginning of the stock's current slump, but it didn't stop there. Last week, the Trump administration restricted the sale of Nvidia's H20 chips, which were developed specifically to meet the already stringent rules for exporting AI chips to China. This move caused Nvidia to take a $5.5 billion write-off. Some analysts believe this move was made to gain leverage in the ongoing trade war with China, but the move could backfire. Several reports suggest that Chinese chipmakers are boosting production of AI chips in response to the export ban. However, the situation isn't nearly as dire as it might seem at first glance. Estimates suggest Nvidia's sales to China were roughly $17 billion or about 13% of its total sales for the fiscal year that ended in January. However, accelerating demand for cutting-edge AI processors will likely help Nvidia make up for any sales lost as a result of the export restrictions. If you have doubts, consider this: Big Four accounting firm PwC estimates that AI could contribute as much as $15.7 trillion to the global economy by 2030. If Nvidia captures just a small portion of that opportunity, the loss of its sales to China will seem like a drop in the bucket. Furthermore, at just 21 times forward earnings, Nvidia stock is a relative bargain for long-term investors. While the stock could still have further to fall, I predict it will be much higher five years from now.

Nvidia's Recent Troubles Should Be Absorbed By The Big Picture (Upgrade) (NASDAQ:NVDA)

Nvidia's investments in AI and autonomous driving, along with strong cash flow and shareholder returns, position NVDA stock for further upside. I was a seller of Nvidia Corporation (NASDAQ:NVDA) back in late August, when I felt the market was getting ahead of itself with the company's prospects. The stock is down around -18% from those levels, and investors can look to the I am an active trader in stocks, FX, crypto, and commodities with over 15 years of market experience. I hold a master's degree in finance and mix microeconomic studies of company financials with a big-picture macroeconomic view. Analyst's Disclosure: I/we have a beneficial long position in the shares of NVDA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Why Nvidia Stock's Real Story Is Mispriced (NASDAQ:NVDA)

U.S. export controls and 32% Taiwan tariffs increase geopolitical friction, but Nvidia's Mexico pivot preserves supply chain efficiency. As headlines obsess over Nvidia's (NASDAQ:NVDA) Wall Street's downgrades and its massive $2.4 trillion market cap, they overlook more profound changes underway. Nvidia is not simply making silicon quicker; it is re-architecting the AI value chain to become a vertically integrated, stackable utility. This I am a full-time investor and independent research analyst with years of hands-on experience managing my own capital in the stock market. My primary focus lies in identifying undervalued breakout opportunities, companies that sit at the crossroads of deep value and explosive growth potential, particularly in technology, AI, fintech, and cloud infrastructure. I specialize in uncovering businesses that are misunderstood, overlooked, or on the brink of major re-ratings. My approach blends rigorous fundamental analysis with forward-looking strategy, using mental models and a proprietary framework to assess business quality, leadership execution, and scalable moats. I'm especially drawn to platform businesses with network effects, and inflection-point monetization models that the market has yet to fully price in. At the same time, I place a strong emphasis on risk control, monitoring cash flow resilience, balance sheet flexibility, and valuation floors to protect capital. My goal is not just to chase growth, but to invest where narrative change can unlock multi-year upside with limited downside. Through my writing, I aim to share institutional-grade research that is practical and engaging, empowering other investors to see beyond headlines and into the core drivers of durable value creation. Analyst's Disclosure: I/we have a beneficial long position in the shares of NVDA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Nvidia investors balk at beaten down valuation as risks mount

The latest shock for the chipmaker came after saying last week U.S. authorities have barred it from selling the H20 chip line in China, a move that will cost it billions of dollars. The news added to concerns that spending on AI could be poised to slow, especially as the escalating trade war further clouds overall prospects for economic growth. "The outlook isn't as compelling as it was, and you really have to make a lot of assumptions here, about tariffs, China, hyperscalers, the macro," said Krishna Chintalapalli, portfolio manager and tech sector head at Parnassus Investments. "Because all those things are compounding, the level of uncertainty is much higher than it has been." Shares of Nvidia have dropped 24% this year, roughly twice the decline of the Nasdaq 100 Index. Chintalapalli views the stock as fairly valued, even with shares trading at 22 times estimated earnings, and well below their long-term average. The valuation is not far from the S&P 500 Index's multiple of 19. The stock fell as much as 3.7% in premarket trading Monday. That Nvidia only trades at a slight premium to the market is notable given the company's growth is expected to be dramatically faster, with revenue seen rising 57% in the current year, compared with 4.7% for the S&P. The growth largely reflects how so-called hyperscalers -- Microsoft Corp., Alphabet Inc., Amazon.com Inc., and Meta Platforms Inc., which are among Nvidia's biggest customers -- have allocated tens of billions of dollars building out AI infrastructure. "If you want to buy here, you're probably betting on hyperscaler demand for AI," Chintalapalli said. While the intent to spend on AI is there, "they can always slow down on the margins" and "you can't make a call on the pace of investment, given the macro and tariff issues." Nvidia's share slump and resulting hit to valuation underline the perils the chipmaker faces from a potential slowdown in AI spending and the Trump administration's attempts to reset global trade relations. Should the trade tensions tip the economy into recession, all bets about future earnings are off, undermining the valuation case. The analyst consensus for Nvidia's full-year earnings has dropped 1.1% over the past month, while the view for revenue is down 1%, according to data compiled by Bloomberg. Microsoft has announced plans to pull back on data center projects, and while others such as Alphabet have maintained capital spending plans for the current year, the outlook for 2026 remains uncertain. Investors had already been debating the outlook for AI spending, ever since China's DeepSeek emerged in January, claiming performance that is comparable to US models despite costing less and requiring fewer chips. Still, as tariff talks progress, investors are starting to see that demand for AI gear leaves Nvidia less exposed to trade risks than some of its mega cap peers. Bloomberg Intelligence wrote earlier this month that "AI-focused players like Nvidia appear most insulated" from tariffs, while other chipmakers -- especially those exposed to end markets like PCs, handsets, autos, and industrials -- "will face indirect pressure via demand destruction." The tariff situation has been incredibly volatile. A recent reprieve on smartphones, computers and other electronics seemed to have removed an overhang from the shares, though Trump maintained the measure is temporary. Last week, ASML Holding NV sold off after it reported first-quarter orders that were weaker than expected, and it warned it didn't know how to quantify the impact of tariffs. Separately, Taiwan Semiconductor Manufacturing Co. affirmed its outlook, suggesting demand for AI-related chips remains strong, although analysts said tariffs are a key question mark. "Politics will remain part of the investment landscape for the foreseeable future, and the landscape will continue to evolve," said Daniel Flax, a senior research analyst at Neuberger Berman. "This will impact many companies, including Nvidia, but I think it will continue to execute and innovate, and that will continue to drive growth. I think shares look pretty attractive if you have a 12- or 18-month time horizon." Analysts have stayed broadly positive, as nearly 90% of the firms tracked by Bloomberg recommend buying the stock. Furthermore, with shares trading more than 60% below the average analyst price target, implied returns for the stock are among the highest over the past few years. Those who are still long-term bulls see the recent weakness as a buying opportunity. In the short-term, "the news removes a major overhang -- the stock H20 chipis more attractive today than yesterday," Ivana Delevska, chief investment officer at SPEAR Invest said Wednesday, after Nvidia's initial dip on the H20 chip news, adding that in the long-run, Nvidia not having access to the Chinese market would be a negative. Shana Sissel agrees that the current valuation marks a good time to buy, especially ahead of the company's late May earnings report, which she expects will show signs of Chinese customers front-loading purchases in anticipation of tariffs. "I think it's attractive," she said. "I'm obviously a bull on it. I've always liked Nvidia stock."