Nvidia Stock Is Falling The Hidden Factors Beyond Tariffs

Nvidia (NASDAQ: NVDA), the $2.3 trillion semiconductor leader, has seen its stock plunge 25% year-to-date. While headlines blame U.S.-China trade tensions, the decline runs deeper. From cooling GPU demand to cutthroat competition and regulatory headwinds, multiple forces are battering this AI titan. For U.S. investors, understanding these risks is critical. Here’s why Nvidia’s troubles extend far beyond tariffs—and what it means for your portfolio.

Nvidia AI chips used in machine learning and deep learning applications — Nvidia continues to be a leader in AI technologies, but growing competition and a slowdown in AI investments may pose challenges.

Tariffs & Export Controls: Just the Tip of the Iceberg

The Biden administration’s tiered export rules, effective May 15, restrict advanced AI chip sales to China, impacting Nvidia’s H20 and A800 GPUs. Though China accounts for just 10% of Nvidia’s revenue, the rules amplify fears of prolonged geopolitical friction. Bank of America warns of “volatility until Liberation Day (May 15),” but analysts argue the bigger issue is shrinking margins on China-compliant chips. Meanwhile, tariffs on Chinese imports threaten to raise production costs, squeezing profitability in Nvidia’s gaming and data center segments.

Slowing GPU Demand: Gaming and Crypto Crash

Nvidia’s gaming revenue fell 11% YoY in Q4 2024, reflecting a post-pandemic hangover. Gamers are delaying upgrades amid inflation, while the crypto crash erased demand for high-end GPUs used in mining. Ethereum’s shift to proof-of-stake further dented sales. Though Nvidia pivoted to AI, 20% of its revenue still hinges on gaming—a segment now oversupplied. U.S. retailers like Best Buy report swollen inventories, forcing price cuts on RTX 40-series cards.

Rising Competition: AMD, Intel, and the Cloud Giants

Nvidia’s AI dominance faces threats on multiple fronts:

AMD’s MI300X: Outperforms Nvidia’s H100 in AI workloads at lower costs.
Intel’s Gaudi 3: Targets budget-conscious enterprises with 50% better efficiency.
Cloud In-House Chips: Google’s TPU v5 and Amazon’s Trainium 2 reduce reliance on Nvidia.

With hyperscalers prioritizing cost efficiency, Nvidia’s 90% data center market share looks fragile. CEO Jensen Huang admits competition is “heating up,” but insists CUDA’s software ecosystem remains unmatched.

Supply Chain Whiplash: From Shortages to Gluts

The chip shortage of 2021 has flipped to a global oversupply. TSMC reports rising inventories as PC and smartphone sales stagnate. For Nvidia, this means fewer opportunities to hike GPU prices. Mid-range GPUs like the RTX 4060 now sell at discounts, eroding margins. While AI chip demand stays robust, UBS notes the broader semiconductor downturn could pressure Nvidia’s valuation.

Valuation Reality Check: Is the AI Bubble Bursting?.

Nvidia’s forward P/E ratio has dropped to 28x—well below its 5-year average of 48x—but remains elevated versus Intel (15x) or AMD (35x). The stock’s premium hinges on flawless AI execution, yet Q1 2025 guidance of $43 billion (+65% YoY) suggests confidence. Bears argue the “AI premium” ignores risks like regulation and competition, while bulls see a buying opportunity.

Regulatory Risks: Antitrust and Export Rules

The U.S. DOJ is reportedly scrutinizing Nvidia’s AI market dominance, mirroring EU antitrust actions. Meanwhile, tighter export rules could expand to Middle Eastern allies, complicating global sales. While Nvidia adapts with region-specific chips, compliance costs and delayed product launches threaten margins.

Macroeconomic Headwinds: Inflation and IT Spending Cuts

Rising interest rates and inflation have pushed U.S. firms to slash IT budgets. Cloud giants like Microsoft and Amazon are optimizing existing infrastructure, slowing data center expansions. For Nvidia, this means longer sales cycles and pressured revenue growth—especially if the Fed delays rate cuts.

Nvidia’s diverse supply chain and manufacturing locations across the globe. — Nvidia is diversifying its supply chain to reduce reliance on any single region, mitigating risks tied to international trade policies

Conclusion: Can Nvidia Regain Its Momentum?
Nvidia’s stock slump reflects a perfect storm of cooling demand, fierce competition, and regulatory uncertainty. While its AI software moat and Blackwell GPU adoption offer long-term promise, short-term risks loom large. U.S. investors should monitor May 15 export rule impacts, Q1 earnings (May 22), and competitive moves from AMD. For now, Nvidia remains a high-risk, high-reward play in the AI revolution.

FAQ Section

Q: Is Nvidia stock undervalued today?
A: With a PEG ratio of 0.69x, some analysts say yes—but macro risks justify caution.
Q: How will U.S. export rules affect Nvidia?
A: Immediate China revenue loss is manageable, but prolonged restrictions could stifle growth.
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Why Nvidia Stock Is Falling The Hidden Factors Beyond Tariffs