Shares of Nvidia (NVDA -6.21%) are plummeting on Thursday. The artificial intelligence (AI) chip giant's stock lost 7.8% as of 1:30 p.m. ET, and was down as much as 9.5% earlier in the day. The steep decline comes as the S&P 500 (^GSPC -4.38%) and Nasdaq Composite (^IXIC -4.40%) lost 4.9% and 5.1%, respectively.
President Trump's sweeping tariffs have triggered a widespread sell-off in semiconductor stocks, with Nvidia caught in the crossfire as the world responds.
President Trump's Wednesday announcement of extensive tariffs has set off a trade war. The levies were met today with a heavy-handed response from China. Yesterday, there was some hope for Nvidia, as the White House carved out an exemption for raw semiconductors, but it appears this may be temporary. China's response makes it more likely Trump will not keep the exemption in place.
Even if the exemption stays, it is only for the chips themselves and does not apply to other parts of the supply chain, like the servers that contain Nvidia's chips. As CEO Jensen Huang said in 2023, "Total independence of the supply chain is not a real practical thing for a decade or two."
China's response will hurt Nvidia as well. Nvidia has significant market share in China. As an already premium-priced brand, the rise in cost to sell in-country will seriously hinder its ability to remain competitive with China's ever-advancing domestic producers. Both directions of tariffs will materially impact Nvidia and other semiconductor makers.
While I remain bullish on Nvidia long term, there are too many unknowns right now. I would wait until we see how this shakes out to invest further.
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