Nvidia Faces Challenges Amid Export Restrictions and Market Uncertainty

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.

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.

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.

AWS Just Delivered Great News for Nvidia Shareholders | The Motley Fool

Nvidia (NVDA 3.86%) has faced its share of negative news in recent weeks, from a halt on its exports to China to uncertainty about tariffs on imports into the U.S. of its chips. That's why the generally high-flying stock has flown much lower in recent times. Nvidia, after soaring 800% over the past two years, has slipped 26% since the start of the year. The U.S. recently informed Nvidia that it would need a license to continue selling its chips to China -- meaning the company can't fulfill current orders, and the company said it would take a $5.5 billion charge. This is against an already difficult backdrop of potential import tariffs ahead. President Donald Trump exempted electronics from tariffs but indicated this would be temporary. Investors have worried that Trump's plans to tax imports could increase Nvidia's costs, as the company produces most of its top-selling artificial intelligence (AI) chips in Taiwan, and hurt growth. Another concern is tariffs could weigh on Nvidia's customers too, and they may rein in spending on AI. But just this week, a comment from an executive at Amazon's (AMZN 4.55%) Amazon Web Services (AWS) offered investors some relief from the uncertainty. In fact, AWS delivered great news for Nvidia shareholders. First, though, let's consider where Nvidia stands right now, amid the current turmoil. Nvidia is the world's No. 1 designer of AI chips, known as graphics processing units (GPUs). These chips, along with related products and services, have helped Nvidia build an AI empire. Chief Executive Officer Jensen Huang has even referred to Nvidia as the "on ramp" to AI since it has the tools to help customers with all of their AI needs. This has helped Nvidia grow its revenue in the double and triple digits, reaching record levels in recent times. For the latest full year, Nvidia reported a 114% gain in revenue to a mind-boggling $130 billion. And 88% of this came from the company's data center business, the business serving AI customers. All of this means Nvidia's growth prospects are closely linked to its AI customers' spending plans. From this angle, the year started off on the right foot, with Meta Platforms saying it would spend as much as $65 billion to support AI growth this year and companies including Alphabet and Amazon also talking about their focus on AI investment. But investors started to question whether this would continue as general market uncertainty deepened. Analysts and economists have suggested that Trump's tariffs could result in higher prices for everyone, leading to an economic slowdown and even a recession. Just this week, the International Monetary Fund predicted U.S. growth this year will slow to 1.8%, down from 2.8% last year. In such a situation, investors have closely watched for any changes in companies' AI spending plans. In fact, an analyst report suggesting an AWS slowdown in AI spending dragged down shares of Nvidia in one trading session earlier this week. AWS is a major customer of Nvidia, offering its products to cloud customers. The good news, however, followed quickly. Kevin Miller, AWS vice president of global data centers, in a post on LinkedIn directly addressed concerns about the company's AI infrastructure projects -- and his words don't indicate a slowdown. "This is routine capacity management, and there haven't been any recent fundamental changes in our expansion plans," he wrote in a post on Monday. Instead, he said, any changes are due to the fact that AWS considers various solutions at the same time, allowing it to, for example, decrease capacity in one area and increase it in another. So, any recent moves haven't been part of a reduction in capacity. Miller added that AWS continues to see "strong demand" for generative AI and foundational workloads. All of this means that, though Nvidia may face headwinds such as tariffs in the months to come, demand for its products and services isn't showing signs of weakness. Customers continue to invest heavily in AI, and Nvidia, as the AI leader, is well positioned to benefit. A slowdown in economic growth could even push companies to prioritize their AI programs, with the idea that AI will make them more efficient. So, though Nvidia may face some bumps along the road in the near term, this stock still is likely to offer investors a win over the long haul.

President Donald Trump Just Dealt a Jarring Blow to Nvidia. Can the Artificial Intelligence (AI) Chip King Recover and Reclaim Its Previous Highs? | The Motley Fool

Things have gone from bad to worse this year for the artificial intelligence (AI) chip king Nvidia (NVDA 3.56%). It all started with the emergence of DeepSeek, a Chinese start-up that used less advanced Nvidia chips to build a chatbot that could rival OpenAI's ChatGPT, supposedly at a fraction of the cost. This made some investors question what AI infrastructure spending might ultimately look like at a time when valuations across the industry were sky high. Then, Nvidia had to deal with the threat of tariffs since the company sources a lot of its chips from Taiwan. Although Trump has excluded semiconductors from his tariffs, the administration just dealt another blow to Nvidia stock. On April 15 after the market close, Nvidia disclosed in a filing that the U.S. government had informed the company it would need to obtain a license to export its H20 chips to China, including Hong Kong and Macao. The government told Nvidia the purpose of this restriction is to prevent China from obtaining parts it could use to build a supercomputer. As a result, Nvidia said it expects to take a $5.5 billion charge in its fiscal 2026 first quarter due to H20 chip inventory, purchase commitments, and associated reserves. Nvidia has been dealing with increased export restrictions to China since the Biden administration. In fact, the company created the H20 chip, which trains AI models less quickly than some of the company's most advanced chips, in order to comply with previous restrictions. Trump's latest order is likely tied to the tense relations between the U.S. and China, but considering these actions have now been building through multiple administrations, it's also possible this export restriction may outlast the current trade war. Nvidia stock is down roughly 24% year to date. During an appearance on CNBC, Wedbush analyst Dan Ives referred to the new restrictions as a "blockade" by the U.S. government and the "first shot across the bow." He said the near-term effect is that Wall Street analysts are likely to model zero revenue from China for Nvidia this year and take earnings projections down 10%. In fiscal 2025, Nvidia generated about $17.1 billion in revenue from China, or about 13% of its top line. The export restrictions and continued uncertainty stemming from the trade war will have negative near-term impacts on the company from a margin and earnings perspective. That said, much of the sell-off this year already reflects this headwind. However, analysts largely remain bullish on Nvidia as the best-in-class artificial intelligence chipmaker in an AI industry that is still in the early innings of its growth. Sure, the total addressable market might be smaller right now, but other chip players like AMD are facing similar challenges. Meanwhile, Nvidia's latest-generation Blackwell chip generated $11.0 billion in revenue last quarter, "the fastest product ramp in [the] company's history." CEO Jensen Huang is already talking about the company's next chip, the Vera Rubin, which will be faster than Blackwell and could be ready by 2026. After that, Nvidia has plans for even better offerings in 2028. The stock now trades at 23 times forward earnings estimates, near its lowest level in two years. It could be rough sledding for the industry this year, but if you can take a long-term view, this is the time to start accumulating shares. Nvidia can eventually reclaim its previous high of $153 per share, implying significant upside from current levels.

Could Nvidia's Sales Drop 30% due to a Trade War Between the U.S. and China? | The Motley Fool

It's been a rough year for Nvidia (NVDA 4.11%). Since 2025 began, Nvidia's stock has fallen by more than 30%, shedding more than $1 trillion in value off the company's market cap. Yet Nvidia's end markets are still growing by leaps and bounds, especially when it comes to data center revenue tied to the artificial intelligence (AI) sector. Investors looking for a rebound, however, should take caution. Up to 30% of the company's revenues could be at risk this year due to the ongoing trade war between the U.S. and China. If you're betting on Nvidia, you need to understand what's at risk. Earlier this month, Nvidia revealed that it may be forced to take a $5.5 billion charge related to H20 chips intended for sale in China. New rules may require the firm to obtain licenses to export these AI chips to China. According to the BBC, Nvidia was told that the license requirement "addresses the risk that the covered products may be used in, or diverted to, a supercomputer in China." Nvidia's management team was also told that these new rules "will be in effect for the indefinite future." When looking at the latest filings, roughly 14% of Nvidia's sales last quarter stemmed from China. Losing this sales base would have a large negative effect, especially in light of Nvidia's premium valuation. But this figure could actually be dramatically understating China's true contribution to Nvidia's revenue streams. Singapore, a neighboring country in Asia, accounts for a whopping 18% of Nvidia's current sales base -- even larger than China's contribution. Yet less than 2% of these sales actually export to Singapore as their end destination. "Customers use Singapore to centralize invoicing while our products are almost always shipped elsewhere," Nvidia's management team has clarified. Last month, it was found that many of these shipments ended up in China, meaning China's true share of Nvidia's sales base could be as high as 30%. With new licenses being required to export its H20 chips, Nvidia will likely take an immediate multibillion dollar charge next month when its quarter closes. According to recent reporting, Chinese firms have placed more than $16 billion in orders for Nvidia's H20 chips over the 90 days of 2025 alone. All of these sales are now at risk. Meanwhile, local Chinese competitors like Huawei are investing heavily to expand their ability to replace Nvidia's lost sales base. The end result could see Nvidia losing considerable market share in the country, even if recent rules are rolled back. That's especially true given the Chinese government has been increasingly vocal about reducing its dependence on foreign chipmakers. While Nvidia's sales base won't fall by 30% overnight, this is clearly a growing headwind for the company. At the start of 2025, shares were priced at 30 times sales despite a multitrillion dollar valuation, leaving little room for error. After losing around one-third of its value during the 2025 market correction, however, Nvidia's shares are now priced at just 18.4 times trailing sales and 11.7 times forward sales. It's possible that the threat to its Chinese sales base has already been priced in. But as the second-largest consumer of artificial intelligence graphics processing units (AI GPUs), losing China as a customer would be a long-term blow to Nvidia's growth prospects. This headwind is critical to watch for Nvidia investors moving forward.

Is Nvidia an Undervalued Growth Stock or a Falling Knife? | The Motley Fool

The AI chipmaker is becoming a divisive investment in this choppy market. Nvidia (NVDA 4.11%) was one of the market's hottest growth stocks of the past decade. From the first trading day of 2014 to the last trading day of 2024, its stock surged 33,430%. From fiscal 2015 to fiscal 2025, which ended in January, its revenue grew at a compound annual growth rate (CAGR) of 39% as its earnings per share (EPS) increased at a CAGR of 58%. That breakneck growth was initially driven by its brisk sales of graphics processing units (GPUs) for gaming, which were also used for professional graphics production and cryptocurrency mining. But over the past few years, its data center GPU sales skyrocketed as the generative AI market exploded. Nvidia's data center GPUs can process artificial intelligence (AI) tasks much faster than standalone CPUs, so all of the world's top AI companies -- including OpenAI, Microsoft, and Alphabet's Google -- use its chips. As the leading seller of the picks and shovels for the AI gold rush, Nvidia naturally became the bellwether of that booming market. However, Nvidia's stock has declined about 23% this year as the Trump administration's unpredictable tariffs, the intensifying trade war, and other macroeconomic headwinds drove investors toward more conservative investments. Let's see if Nvidia's becoming an undervalued growth stock after that pullback -- or if it's a falling knife which could cut bargain-seeking investors. In fiscal 2025, Nvidia's revenue rose 114%, its adjusted gross margin expanded 170 basis points to 75.5%, and its adjusted EPS increased 130%. Most of that growth was driven by its data center revenue, which surged 142% to $115 billion and accounted for 88% of its top line. Those growth rates are explosive, but Nvidia's quarterly numbers reveal two near-term issues: Its year-over-year growth rates are slowing down, and its gross margin is slipping sequentially. Data source: Nvidia. YOY = Year over year. For the first quarter of fiscal 2026, Nvidia expects its revenue to rise 44% year over year as its adjusted gross margin dips to a midpoint of 71%. For the full year, analysts expect its revenue and adjusted EPS to grow 54% and 48%, respectively, as the AI market continues to expand and it ramps up its production of its newest Blackwell GPUs. Nvidia is still growing like a weed, but the bears think its slowdown will worsen as the red-hot AI market finally cools off. Four challenges could throttle its near-term growth: the export curbs against China, higher tariffs that could drive it to manufacture its newest chips at lower margins in America, slower AI spending in a challenging macro environment, and competition from cheaper data center GPUs from Advanced Micro Devices (AMD 2.30%), Huawei, and other chipmakers. In Nvidia's latest conference call in February, CEO Jensen Huang brushed aside those concerns and said it was "fairly safe to say that AI has gone mainstream and that it's being integrated into every application." Huang noted that while its revenue in China was roughly cut in half by the export curbs, the region's weight on its top line fell from 17% in fiscal 2024 to just 13% in fiscal 2025. Therefore, the strength of Nvidia's other markets should offset the pressure from its export curbs and tariffs in China. Nvidia's growth is gradually slowing down, and its gross and operating margins could be compressed in this challenging and unpredictable macro environment. But at $103 a share, it still looks cheap at 23 times forward earnings. AMD, which is growing at a slower clip, has a forward price-to-earnings ratio of 19. Nvidia controls about 98% of the data center GPU market, according to TechInsights, and it should remain well ahead of its smaller and less sophisticated competitors. It also locks a lot of AI developers into its proprietary Compute Unified Device Architecture platform for GPU applications, which can't be natively accessed by other data center GPUs. So if you believe Nvidia will remain at the top of this booming market, then its stock still looks undervalued. It could remain volatile over the next few quarters, but investors who accumulate it through those swings could be well rewarded in the future.

Nvidia Is Nearly Cheaper Than the S&P 500 Using This 1 Important Metric. Is It Time to Buy?

Nvidia (NVDA 4.11%) has been notorious for being a high-growth, highly valued stock since its run began in early 2023. However, that's no longer the case using this one common and important evaluation metric. Now, it's nearly the same price as the S&P 500 (^GSPC 0.74%), which is an odd thing to say considering how much growth Nvidia is expected to put up over the next few years. However, this metric has one important consideration, and it could be giving investors false hope. The forward price-to-earnings metric is useful if you understand its nuances The valuation metric that I most like to use -- and the one that's relevant in this discussion -- is the forward price-to-earnings (P/E) ratio. By definition, forward earnings haven't been achieved yet; they're just projections. As a result, they are inherently flawed because these predictions rarely come true. Furthermore, because the forward P/E ratio uses multiple analyst projections to come up with an average value, not every one of them can be right. But the average of all of them gives investors an idea of where the company's earnings could be heading, which is important considering how the market works. The market isn't a rearward-looking entity. If it were, then tariff concerns wouldn't affect the stock market because it would only be looking at the past when tariffs weren't an issue. This is why the trailing P/E ratio is somewhat irrelevant (in my opinion) because it looks at where the stock has been, not where it's going. Still, the trailing P/E ratio can be a useful metric in conjunction with the forward P/E, as investors need to make sure earnings aren't going to fall off a cliff in future quarters. The forward P/E ratio is especially useful for high-growth companies like Nvidia, as valuing it on trailing earnings when monster growth is expected in the next few quarters isn't a wise move. From this standpoint, Nvidia has nearly reached the same level as the S&P 500. NVDA PE Ratio (Forward) data by YCharts At 22.4 times forward earnings, Nvidia is only slightly more expensive than the S&P 500's 19.8 times forward earnings valuation. This is despite the fact that Wall Street analysts project 54% revenue growth in FY 2026 (ending January 2026) and 23% growth in FY 2027. However, this price could be artificially low, as analysts might be waiting for Nvidia to report first quarter earnings before adjusting their projections. There are plenty of fears surrounding Nvidia, especially with tariffs looming. But is this enough to avoid the stock? Reports are mixed on chip demand Nvidia's graphics processing units (GPUs) have become the go-to computing components for training and running AI models. As more computing power is needed for these models, Nvidia will sell more. However, some AI hyperscalers have been slowing their data center expansion plans. None of these reports jive with what their management said just a few weeks ago, and they don't fit with what critical supplier Taiwan Semiconductor (TSM 0.57%) stated. In TSMC's Q1 results, its CEO noted, "We understand there are uncertainties and risks from the potential impact of tariff policies. However, we have not seen any change in our customers' behavior so far." Nvidia uses TSMC's foundry to produce its chips, which clearly indicates that Nvidia hasn't canceled a bunch of its chip orders from TSMC yet. That doesn't mean there won't be a slowdown, but the market is currently assuming the worst-case scenario for Nvidia's business, which is why the stock is down so much. As a result, I think right now represents an excellent buying opportunity, as long as you can stay patient with the stock for three to five years. If you can, there's a high probability that Nvidia will crush the market over that time frame.

Where Will Nvidia Stock Be in 3 Years? | The Motley Fool

Since the beginning of 2023, Nvidia (NVDA 4.11%) has added more than $2.2 trillion to its market capitalization on the back of the artificial intelligence (AI) boom. Demand is through the roof for the company's graphics processing units (GPUs) for the data center, which are the gold standard for developing AI models. Nvidia's customers include some of the world's biggest technology companies, which are battling for AI supremacy, including Microsoft, Amazon, Meta Platforms, and Alphabet. These four companies are forecast to spend a record amount of money on data center infrastructure during 2025. But according to Nvidia CEO Jensen Huang, that spending will increase significantly every year for the foreseeable future, and cross an important milestone in 2028. The company continues to launch new chips to maintain its edge over the competition, so here's where its stock could be in three years. Nvidia's H100 data center GPU dominated the industry in 2023 and for most of 2024. It was based on the company's Hopper architecture, which has since been superseded by Blackwell and, more recently, Blackwell Ultra. The upcoming Blackwell Ultra GB300 GPU can deliver up to 50 times more performance than the H100 in certain configurations, because it was designed for next-generation AI models, which are capable of "reasoning." In the past, chatbots like OpenAI's ChatGPT would quickly render one-shot responses to users' queries, which made them convenient, but they occasionally blurted out inaccurate information. Reasoning models spend more time thinking and correcting potential errors in the background in order to deliver more polished responses. While this is a great step forward for the AI industry, it does create some new challenges. Huang says reasoning models require a staggering 100 times more computing power than their predecessors for two reasons. First, they consume 10 times more tokens than traditional large language models (LLMs) because of all the thinking that goes on in the background. Second, they are much slower to render responses, which means GPUs need to be up to 10 times more powerful to offset the delays, or else AI will lose the convenience factor that people have grown to love. That's why new chips based on the Blackwell and Blackwell Ultra architectures are in such high demand. The four Nvidia customers I mentioned at the top -- Microsoft, Amazon, Meta, and Alphabet -- have told investors they plan to spend over $300 billion (combined) on data center infrastructure and chips this year, which would be a record. That doesn't include other big spenders like OpenAI, Tesla, or Oracle. But Huang thinks this is just the beginning, because three years from now in 2028, he predicts data center spending will top $1 trillion annually, which would be a monumental tailwind for Nvidia's business. Nvidia generated a record $130.5 billion in total revenue during its fiscal year 2025 (which ended Jan. 26). The data center segment accounted for $115.2 billion of that figure, which represented a whopping 142% increase from the prior year, highlighting how quickly GPU demand is growing. Nvidia's soaring top line also drove a significant increase in profits, with the company's earnings per share (EPS) soaring by 130% to $2.99 in fiscal 2025. That places its stock at a price-to-earnings (P/E) ratio of just 36, which is a 39% discount to its 10-year average of 59.6. But the stock looks even cheaper on a forward basis. Wall Street's consensus estimate (provided by Yahoo! Finance) suggests Nvidia will deliver $4.42 in EPS during the current fiscal year 2026, placing its stock at a forward P/E ratio of 23.9: NVDA PE Ratio data by YCharts. In other words, Nvidia stock would have to soar by around 149% over the next 12 months just to trade in line with its 10-year average P/E ratio of 59.6, implying a price of $263 per share. But even if its P/E ratio remains at 36 instead, the stock could still top $200 in fiscal 2027 (which ends in January 2027) based on Wall Street's earnings forecast for that year. Therefore, as long as Nvidia maintains some annual earnings growth after that, its stock should be trading well beyond $200 in calendar year 2028. Considering that's the year Huang is forecasting $1 trillion in data center spending, the company should have no problem generating more earnings. The reason Nvidia's P/E ratio looks so attractive right now is because its stock is down 29% from its all-time high amid the simmering global trade tensions, which threaten to dampen economic growth in the near term. Some of Nvidia's top customers might be forced to temporarily pull back on their data center investments if they suffer a slowdown in their core businesses, which would reduce demand for GPUs and dent the company's earnings potential. However, AI is shaping up to be a long-term boom, and the industry can't move forward without the hardware supplied by companies like Nvidia. Therefore, investors who buy Nvidia stock today might have to weather some volatility while the U.S. negotiates new trade deals with other countries, but they could do extremely well if they put the short-term noise aside and stay focused on the years ahead.

Prediction: Nvidia Stock Is Going to Soar After May 1 | The Motley Fool

Nvidia (NVDA 4.11%) has been taking a beating so far this year. Shares have plunged nearly 30% year to date as of this writing. Yet the stock is still higher by more than 27% over the past 12 months. The artificial intelligence (AI) leader remains one of the largest companies by market cap, valued at about $2.4 trillion. The question for investors is whether Nvidia stock can regain its momentum and return the company to a valuation of $3 trillion or beyond. I believe it can, and I think one key date to watch is coming up on May 1. The decline in Nvidia shares in recent months has had several forces behind it. Most obvious was the stock's more than 800% return over the two-year period ending Dec. 31, 2024. It's natural for some investors to want to protect those gains. Trying to time stock prices can be hazardous to one's financial health, though. Long-term investments are better left untouched if the company's underlying business prospects remain strong. That brings us to another headwind for Nvidia stock. Uncertainty related to tariffs and general demand for AI infrastructure. The company was recently forced to take a $5.5 billion charge as the U.S. government placed indefinite restrictions on its H20 chip sales to China. Those chips were specifically designed for the Chinese market, and that business will inevitably be filled by other, potentially domestic, Chinese chip suppliers. While China sales are important for Nvidia, they only represented about 13% of total revenue in fiscal year 2025. More critical is the trajectory of demand for its AI products from major tech companies like Microsoft, Amazon, and others. That is also now coming into question. Recent reports have reiterated a Wells Fargo analyst note saying that Amazon Web Services (AWS) has delayed prior plans for new data center leases. Microsoft, another large cloud infrastructure provider, has made similar decisions to slow data center expansion, according to the analysts. That comes after plans to aggressively expand cloud infrastructure capacity with hundreds of billions of dollars in capital spending for Nvidia's GPU hardware had been announced by several companies. Others, including xAI and Meta, appear to be continuing with growth plans. Amazon CEO Andy Jassy had previously told CNBC that he didn't expect to cut back on capital spending for data center compute capacity. That's why investors need to mark May 1 on their calendars. Amazon is scheduled to report its first-quarter earnings on that date. Microsoft will be providing its quarterly update the day prior. Amazon AWS vice president of global data centers Kevin Miller called any modification in plans "routine capacity management." If the companies reiterate that capital spending plans are basically on track, investors could pour back into Nvidia stock after its recent plunge. Nvidia's price-to-earnings (P/E) ratio is now near a three-year low based on current fiscal year earnings estimates. The long-term growth of AI doesn't look to be hitting a wall. Enterprises, as well as consumers, should increase use. And Nvidia isn't just making money on AI hardware. It has robust software architecture offerings that companies are buying. It also has a fast-growing robotics and assisted driving segment. Business spending could fluctuate. An economic slowdown or even recession could delay the pace of AI expansion. In the end, though, Nvidia remains the sector leader. I suspect long-term investors will look back on its recent stock price as a fine investment opportunity.

This Could Be a Make-It-or-Break-It Moment for Nvidia. Here's What to Watch For This Week. | The Motley Fool

Nvidia (NVDA 4.11%) has been one of the biggest winners of the artificial intelligence (AI) boom so far. The tech giant designs the world's most powerful chip -- a graphics processing unit (GPU) -- and it's become the star player in the AI buildout. GPUs are used to drive the most critical AI tasks, such as the training and inference of models. The company hasn't stuck to only chips, though. Instead it's constructed an AI empire, offering the products and services customers need to develop and expand infrastructure and eventually apply AI to real-life problems. All of this has helped drive Nvidia's revenue to record levels quarter after quarter; in the latest full year, revenue surged 114% to $130 billion. The company has also been able to generate high profitability on sales, with gross margin consistently topping 70%. This is fantastic, but considering the potential for a tougher economic environment ahead, investors have worried about one particular thing -- and this factor could determine whether Nvidia's growth soars or sinks in the quarters ahead. Now, as earnings season unfolds, we're about to get some answers on this point. In fact, some key information could be announced this week, making right now a make-or-break moment for Nvidia. Here's what to watch for. So first, let's consider the reason for the company's success. Of course, its high-performance products and services top the list. Nvidia's latest Blackwell architecture, released this winter, includes various game-changing elements; these include the fastest chip yet, as well as gains in reliability, networking, and security. Demand for Blackwell was so high that it exceeded supply, and Nvidia is still working tirelessly to ensure delivery of this innovative platform to customers. What has also played a big role in Nvidia's success, though, is the general demand for AI. If customers weren't interested in building out major platforms, Nvidia's revenue picture would look much different. The company relies heavily on this need for AI -- in the most recent quarter, 90% of its total revenue came from its data center business. This is why the general trend in AI investment and buildout directly impacts its prospects for revenue in the quarters ahead. Any signs of a decline in such spending would immediately spark worries in the investment community about Nvidia's growth. And this brings me to the crucial happenings to watch this week, as they could seriously impact Nvidia's prospects and stock performance. Major Nvidia customers Microsoft, Amazon, and Meta Platforms each report quarterly earnings this week -- and during earnings calls, these companies generally offer an update on their AI programs and spending plans for the year. Though these three companies have been going all in on AI in recent quarters, recent events could alter their strategies. President Donald Trump's plans to impose tariffs on imports worldwide may hurt them in two ways: Tariffs could increase their expenses as they import parts and finished goods, and in an environment of higher prices caused by tariffs, consumers may have less money to spend on these tech companies' products. The concern is that against this backdrop, Nvidia's customers may slow or cut their AI spending. So it will be very important for Nvidia shareholders (or potential shareholders) to listen closely to any comments on AI plans from Microsoft, Amazon, and Meta during their earnings reports. Now if you're worried, I have good news for you. So far, there's reason to be optimistic about AI demand ahead -- even with the current tariff turmoil. Last week another big Nvidia customer, Alphabet (GOOG 1.52%) (GOOGL 1.70%), reiterated its plans for $75 billion in capital spending this year and said its relationship with Nvidia is a "key advantage." Alphabet also said it will offer Nvidia's next-generation Vera Rubin superchips when they become available, further showing an ongoing commitment to the chip designer. We also have a positive signal from Amazon Web Services (AWS) ahead of Amazon's earnings report. Last week, an analyst report suggested the company might be cutting back on AI spending, but an AWS executive calmed fears, saying expansion plans haven't changed. All of this means that yes, Nvidia has reached a make-or-break moment. Ongoing strength in AI spending would be great news, but any surprise cut in spending or AI buildout by a major customer could deal a significant blow to the chip giant, at least in the near term. As I mentioned above, signs so far are showing the pace of this AI boom may continue uninterrupted -- but only reassurances from these big Nvidia customers this week will confirm this.

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."