Nvidia’s stock has experienced a significant decline falling 30% from its November 2024 peak of $153, resulting in a loss of around $1.1 trillion in market value. This sharp drop is largely due to the economic uncertainty that followed the 2024 U.S. election, which brought Donald Trump back to office and introduced new tariff policies. Despite his announcement of a 90-day pause on certain tariffs, Nvidia is facing major challenges. Specifically, the tariffs on goods from Taiwan and China, where Nvidia’s products are largely manufactured, have increased dramatically, with China’s tariff reaching a staggering
Impact of Tariffs on Nvidia’s Costs and Margins
The biggest concern for Nvidia is how these tariffs will affect its product costs. With rising tariffs, the company faces the tough decision of either absorbing these increased costs or passing them on to customers. Both scenarios could have negative effects on Nvidia’s growth, particularly if higher prices lead to reduced demand. If Nvidia chooses to keep its prices stable, the company may experience a decline in profit margins.
Nvidia’s Response to Tariff Challenges
Nvidia is staying positive in the face of these challenges. CEO Jensen Huang mentioned that the company’s flexible supply chain, along with strong demand for artificial intelligence (AI), should help reduce the short-term effects of tariffs. He also highlighted that Nvidia plans to move more of its production to the U.S. in the future, which could reduce reliance on foreign manufacturing and help manage some of the costs caused by tariffs. He added,
“Tariffs will have a little impact for us short term. Long term, we’re going to have manufacturing onshore.”
Huang also expressed confidence about Nvidia’s AI prospects, noting,
“We’ve successfully ramped up the massive-scale production of Blackwell AI supercomputers, achieving billions of dollars in sales in its first quarter.”
Future Outlook and Financial Forecast
Looking ahead, Nvidia’s growth projections appear to be slowing down. In its latest forecasts for fiscal 2026, the company is predicting slower revenue growth and a decline in profit margins. The first quarter of fiscal 2026 is expected to generate $43 billion in revenue, up 65% from the previous year. However, the company’s gross margin is forecasted to drop by 8.4 percentage points to 70.6%. These figures suggest that Nvidia may face more challenges ahead, as its ability to meet growth targets will be tested by tariff uncertainties.
The Role of AI and Generative Technology
Nvidia remains highly optimistic about the future of AI, particularly generative AI, which is expected to revolutionize industries. The company’s focus on AI supercomputers and the growing demand for generative AI technologies could provide a buffer against the negative effects of tariffs. Huang noted,
“AI is advancing at light speed as agentic AI and physical AI set the stage for the next wave of AI to revolutionize the largest industries.”
However, the return on investment for generative AI remains uncertain, and this could impact demand, particularly if economic conditions worsen.
Risks to Nvidia’s Growth
Several factors could affect Nvidia’s growth. If the market slows down or enters a recession, businesses might spend less on generative AI technologies, which could reduce the demand for Nvidia’s products. Also, higher prices caused by tariffs could make consumers and businesses less likely to buy Nvidia’s expensive GPUs and other products.
Overall Summary
In summary, Nvidia’s stock decline is a result of multiple factors, including increased tariffs and economic uncertainty. While the company remains bullish on its AI prospects, the impact of tariffs on costs and margins, along with potential cuts in generative AI spending, could pose significant risks to its growth. Investors will need to carefully consider these factors when evaluating Nvidia’s stock, particularly as the company’s earnings report in May 2025 could shed more light on the full impact of these challenges.
Tech Writer