By Dan Gallagher

For a nearly $3 trillion company, Nvidia sure is looking cheap these days.

The broad market's tariff-induced selloff on Monday hit the AI titan particularly hard. Nvidia's share price slid nearly 9% to log the worst performance of the U.S. megacap tech stocks for the day. Investors are worried about tariffs and the potential for further export restrictions from the Trump administration that could curb much of the company's business in China. In a note to clients Monday, Vijay Rakesh of Mizuho cited the possibility of "a complete ban of all AI chips to China," which he said could cost Nvidia between $4 billion and $6 billion in revenue for the company's current fiscal year.

Monday's fall wasn't even the biggest one-day drop the stock has seen since the first of the year, as Nvidia has been hit by fears about the sustainability of AI spending and worries about competition--sometimes from its own customers making their own AI chips. The declines have cost Nvidia about 19% of its market value over the past three months. Among megacap techs, only Tesla has fared worse in that time, as the EV maker has shown a significant drop in sales amid concerns about its CEO's effort to slash the size of the federal workforce.

But Tesla's shares are still trading at a pristine valuation of more than 90 times projected earnings for the current year. Nvidia's multiple has now fallen below 25 times - making it the cheapest megacap tech stock save for Google-parent Alphabet, which now trades around 18 times forward earnings.

Nvidia's valuation is now below even the discount it fetched in the wake of the market's panic in January over the revelations of DeepSeek. The Chinese AI startup made fresh claims over the weekend about the cost efficiency of its AI models. In a report Monday, UBS Chief Investment Officer Ulrike Hoffmann-Burchardi said DeepSeek showed "an impressive level of optimizations," but added that lower costs will lead to higher AI adoption.

She also predicted "continued capex growth among hyperscalers, benefiting hardware providers." DeepSeek may still not be sinking Nvidia's sales prospects.

This analysis comes from the Journal's Heard on the Street team. Subscribe to their free daily afternoon newsletter here.

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March 03, 2025 16:26 ET (21:26 GMT)

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