TLDR:
- NVIDIA stock is down 18% year-to-date with shares trading at 23x forward earnings
- Trump’s tariff announcements could mark a turning point if semiconductors are excluded
- China has introduced energy efficiency rules that may disqualify NVIDIA’s H20 chip in Chinese markets
- Growing concerns exist about sustainability of AI spending boom as companies seek more efficient models
- FFT Wealth Management recently increased its NVIDIA holdings by 16.2% despite market challenges
NVIDIA (NVDA) has experienced a difficult start to 2025, with its shares sliding 18% year-to-date through early April. The stock has been caught in broader market concerns regarding potential U.S. tariffs.
The chip giant’s shares were trading at $110.02 in after-hours trading on April 2, following a 1.6% rise that broke a five-day losing streak. The stock has declined approximately 11% over the past month.
Investors are closely watching President Donald Trump’s tariff announcements. If semiconductors are excluded from the new slate of tariffs, NVIDIA shares could experience a relief rally. However, this would depend on Trump not hinting at future semiconductor-specific actions.
Valuation Shift
NVIDIA’s current valuation represents a substantial change from recent years. Shares now trade at 23 times forecast earnings for the next 12 months. This is significantly lower than the 40 times multiple averaged over the past five years.
The more attractive valuation comes despite evidence of strong demand for NVIDIA’s AI chips. Companies like OpenAI have reported booming demand for their AI products and are seeking additional chip access.
OpenAI CEO Sam Altman recently noted the company was struggling with infrastructure strain from the popularity of its image generation tools. This signals ongoing demand for high-performance computing hardware.
Market sentiment, however, remains cautious until there is greater clarity about import tariffs on semiconductors. It remains unclear whether there will be sector-specific duties announced alongside broader tariff measures.
China Challenges
NVIDIA faces additional headwinds in China. The country’s National Development and Reform Commission has introduced new energy-efficiency rules for advanced chips used in data centers.
These regulations could effectively prevent NVIDIA’s H20 chip from being used by Chinese customers building or expanding data centers. The H20 is NVIDIA’s flagship processor designed specifically for the Chinese market.
The chip was created with reduced capabilities to comply with U.S. trade restrictions on advanced chip exports. It is less sophisticated than NVIDIA’s top-tier Blackwell processors available in other markets.
There are also concerns about gray market activities. Resellers have allegedly been using entities registered outside China to purchase NVIDIA’s latest chips through companies in Singapore, Malaysia, Taiwan, and Vietnam.
Singapore has become NVIDIA’s second-largest market, generating about $23 billion in sales in fiscal year 2025, representing 18% of total revenue. This is a sharp increase from $2.3 billion (about 8% of revenue) in fiscal year 2023.
In comparison, China officially accounted for 13% of revenue in FY 2025. Increased regulatory scrutiny on these sales could potentially impact NVIDIA’s performance.
AI Spending Concerns
Market watchers are increasingly questioning the sustainability of the AI spending boom. Signs suggest that massive investments by U.S. tech firms could slow down.
In January, Chinese startup DeepSeek unveiled an AI model that operates at much lower costs than most Western companies. This development could push firms to reconsider hardware-intensive approaches and prioritize efficiency.
AI investments have yielded poor returns so far, causing concern among investors. This is especially true if the U.S. economy weakens due to resurging inflation and slower economic growth amid new tariffs.
These concerns appear to be materializing. Reports indicated that Microsoft had canceled some data center projects in the U.S. and Europe over the past six months due to oversupply relative to demand forecasts.
Alibaba’s Chairman Joe Tsai also recently cautioned about a potential bubble in AI and data center spending. This could impact demand for NVIDIA’s high-performance chips.
Despite these challenges, institutional investors continue to show interest in NVIDIA. FFT Wealth Management increased its holdings by 16.2% during the fourth quarter, acquiring an additional 5,246 shares.
As of its latest SEC filing, FFT Wealth Management held 37,601 shares of NVIDIA, valued at approximately $5 million. Several other hedge funds and institutional investors have similarly adjusted their positions in recent months.
Wall Street analysts maintain a generally positive outlook on NVIDIA. According to data from MarketBeat, the company currently has a consensus rating of “Moderate Buy” and an average price target of $171.51.
NVIDIA reported strong quarterly earnings in February, with revenue of $39.33 billion, exceeding analyst estimates of $38.16 billion. The company posted earnings per share of $0.89, surpassing consensus estimates of $0.84.
For the current fiscal year, analysts predict that NVIDIA will post earnings of $2.77 per share. The company maintains a solid financial position with a debt-to-equity ratio of 0.13.
