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The Nvidia (NASDAQ:NVDA) share price has been incredibly volatile in 2025, and especially over the past week. The stock has plunged to $88 at the time of writing (7 April), amid a broader sell-off driven by Trump’s tariff agenda. For context, the stock has fallen from 52-week highs of $153. It’s an unprecedented collapse for a mega-cap stock.
Of course, with the stock now trading at levels not seen for some time, some investors are seeing an entry point. The near-term valuation is almost in line with the S&P500 average.
An unwanted trade war
The immediate catalyst for Nvidia’s decline is Trump’s tariffs and the impending US-China trade war. Trump’s tariffs target advanced semiconductor imports, directly impacting Nvidia’s Asia-centric supply chain.
Over 90% of its chips are manufactured by Taiwan Semiconductor Manufacturing Company, leaving the firm exposed to logistical disruptions even though chips are technically exempt from the tariffs.
While CEO Jensen Huang has downplayed short-term risks — asserting that “tariffs will have minimal impact” and emphasising plans to shift production stateside — analysts worry margin pressures could intensify.
Non-GAAP gross margins already fell to 73.5% in Q4 FY2025, down 3.2% over 12 months due to pricier Blackwell GPU production. Sustained tariffs may exacerbate this trend, particularly if China retaliates with export restrictions on rare earth metals critical to chipmaking.
However, it’s not just a supply issue for Nvidia. Trump’s tariffs have hammered companies making computers and other pieces of technology that use semiconductors and Nvidia’s chipsets. We’re also seeing evidence that some companies are cutting back their data centre spending — a huge market for Nvidia.
Valuation is mixed for now
At first glance, Nvidia’s trailing price-to-earnings (P/E) ratio of 29 times appears steep compared to the sector median of 20 times. However, forward metrics tell a more nuanced story. The forward P/E for fiscal 2026 stands at 18 times while the P/E-to-growth (PEG) ratio of 0.65 suggests deep undervaluation relative to projected earnings growth. In fact, this PEG represents a 56% discount to the sector average and implies Nvidia investors are paying less per unit of expected growth than for most tech peers.
Critically, these forecasts assume no further trade policy escalations. Bank of America analysts note that prolonged tariffs could slash 2026 EPS estimates by 12%-18%, potentially lifting the forward P/E to 26-28 and the PEG above one. Investors must weigh these geopolitical risks against Nvidia’s structural advantages in AI infrastructure.
Tech leadership under pressure
Nvidia’s technological moat remains formidable. The Blackwell GPU architecture powers over 80% of AI training workloads, and Q4 data centre revenue surged 78% year on year to $32.5bn. Huang highlighted “amazing demand” for Blackwell, with billion-dollar sales in its debut quarter.
However, competition is intensifying. China’s DeepSeek AI model could reduce domestic reliance on Nvidia’s chips, while companies like Google and Amazon are developing in-house AI accelerators. These trends contributed to Nvidia’s disappointing Q1 2025 guidance, which foresaw revenue growth slowing to 12% quarter on quarter.
I personally haven’t made my mind up about buying more. Thankfully, the stock is still way above my weighted entry price, but a lot has changed over two years. This could be an opportunity.
