Stock prices of Nvidia fall due to Trump's stricter export regulation
Riding the Tariff Waves: The Nvidia Saga
Nvidia's stock has been on a rollercoaster ride this year, shedding 16.5% since January's opening bell, as of close on 15 April. The rollercoaster gained considerable speed after President Donald Trump's tariff announcements.
The period following Trump's 'Liberation Day' tariffs has seen Nvidia's stock experiencing wild swings. Its shares plummeted to $86.62 on 7 April, a 21.6% fall from their pre-tariff close, before rallying back to a close just fractionally above its pre-tariff level on 11 April.
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Despite the late-week recovery, Nvidia still finds itself in the red for the year. The late rally in the week to 11 April was driven by optimism for a semiconductor exemption from higher-rate tariffs, a hope that may not be realized.
For years, Nvidia (NASDAQ:NVDA) has been one of the hottest stocks on the market, but 2025 has not been kind to it. Nvidia's slide has also sent shockwaves through the S&P 500, as it has been the world's largest company by market capitalization at various points.
Aside from multiple challenges that Nvidia, and its fellow 'Magnificent Seven', has faced this quarter, the company took an additional hit following 'Liberation Day', when Trump unveiled his tariff regime for US trading partners.
"The uncertainty created by the proposed tariffs, potential growth slowdown implications, and the possibility of retaliatory measures from impacted countries had the broader market reacting negatively," said Lale Akoner, a global market analyst at trading platform eToro.
"The semiconductor industry is particularly vulnerable due to the uncertainty surrounding the impact of these tariffs on operations and supply chains."
Export Controls and H20 GPU
The looming trade war between the US and China threatens to ensnare Nvidia in its crosshairs. On 15 April, Nvidia confirmed that exports of its H20 GPU to China would now require a license, and associated charges for its H20 products were projected to amount to $5.5 billion in the current quarter (which ends 27 April 2025).
Nvidia's shares dropped 6% in after-hours trading on the news, and slid 6.8% below their 15 April close the following trading day.
"The*blocking* of H20 shipments to China signals a steep climb for Nvidia in targeting the Chinese market," mused Dan Ives, global head of technology research at Wedbush Securities. "The financial impact may be contained, but the strategic blow is the main focus of the market, as Nvidia now faces significant barriers to penetrating the China market."
At its last quarter, Nvidia's net income was $22.1 billion. Wedbush estimates that China accounted for approximately 10% of Nvidia's revenue.
Reciprocal Tariffs and Implications
Beyond specific export controls, Nvidia also risks being hit by tariffs on any imports into the US. While semiconductors were initially exempt from the initial round of tariffs, the long-term implications remain uncertain, especially given Trump's inconsistent messaging on semiconductor tariffs.
On Friday 11 April, semiconductor chips, along with smartphones and laptops, were exempted from reciprocal tariffs, implying they would be subject to the 10% baseline rate on all imports to the US. However, any optimism that Nvidia might escape higher tariffs on its imports didn't survive the weekend. Trump announced on Truth Social that, rather than an exemption, the Friday announcement merely referred to semiconductors being moved to a different tariff "bucket".
"We are scrutinizing Semiconductors and the entire electronics supply chain in the upcoming National Security Tariff Investigations," Trump posted. "What has been revealed is that we need to manufacture products in the United States, and that we will not be held hostage by other countries, especially hostile trading nations like China."
Commerce Secretary Howard Lutnick also confirmed in an interview with ABC News that an industry-specific tariff model was on the horizon.
"These sector tariffs will not be subject to negotiation," according to Lutnick. "They are simply intended to ensure that we reshore core national security items that need to be produced in this country, whereas virtually all semiconductors are currently manufactured in Taiwan, and are finished in China."
"90% of the world's most advanced semiconductors, including mobile processors, AI GPUs, and high-performance computing chips, are fabricated in Taiwan by Taiwan Semiconductor Manufacturing Co (TSMC)", Akoner noted. Such potential industry tariffs have "significant implications for Nvidia".
The stated goal of tariffs in general is to encourage manufacturers to base production in the US. With semiconductors playing such a strategic role in the AI era, there are few companies that the US government would like to domesticate its operations as much as Nvidia.
Nvidia has already taken steps to do so. It was one of the cornerstone businesses behind Stargate, Trump's flagship AI initiative announced soon after his inauguration. On 20 March, CEO Jensen Huang told the Financial Times that the company was planning to invest hundreds of billions of dollars into strengthening its US supply chain over the next four years.
However, relocating an entire operation to the US in a short span of time seems unlikely, particularly given Nvidia's reliance on TSMC.
TSMC itself has been making efforts to relocate operations from Taiwan to the US. It announced $100 billion in investment into three new production facilities (fabs) in the US, in addition to its ongoing Phoenix, Arizona operation.
However, reconfiguring an entire production ecosystem is no easy feat.
"These transitions require substantial time and resources," said Akoner.
In the interim, tariffs on semiconductor components could hike Nvidia's costs.
"These increased costs may lead to higher prices for customers and squeeze profit margins," said Akoner.
Valuation and Outlook
The lofty valuation of Nvidia's shares has given plenty of investors pause for thought over the past two years, but it has, in fairness, plummeted considerably from the 100-times trailing earnings it has reached during its run.
As of the US market close on 15 April, Nvidia stock traded at 38.16 times trailing earnings and 25.00 times projected earnings, according to data from stockanalysis.com.
Derren Nathan, head of equity research at Hargreaves Lansdown, believes that Nvidia's share price slide has been unwarranted and that the stock remains an appealing prospect.
"We think it's been unfairly caught up in the shift towards more defensive sectors," Nathan stated.
"It's not only the chips that make Nvidia's product so appealing: the CUDA software platform that enables users to optimize the hardware is crucial. AI has the potential to revolutionize numerous industries, and Nvidia is proving to be a key partner in areas ranging from healthcare to self-driving vehicles."
However, Nathan acknowledges "concerns about trade restrictions and the scale of future demand for Nvidia's powerful computer processors" as well as the fact that Nvidia's growth is dependent on its partners.
As always, when considering an investment, it is vital for investors to conduct their own thorough research and consider the downside risks.
- In the context of the uncertain trade environment, Nvidia might consider diversifying its technology operations beyond China to mitigate potential risks associated with export controls and tariffs.
- Despite the recent turbulence in the stock market, some analysts remain optimistic about Nvidia's future, attributing its appeal to its cutting-edge technology, especially its CUDA software platform, which is instrumental in enabling AI optimization across various industries.
