Nvidia (NVDA) stock might have hit the ground after the massive 19% price drop, wiping out approximately $470 billion in market capitalization, despite posting a quarterly report that exceeded earnings expectations by 4.96% and a 3.23% surplus in revenue.
This sell-off was driven by a mix of geopolitical, competitive, and financial factors that shook investor confidence and sparked debates about the sustainability of highly valued tech stocks, especially in light of the Trump administration’s trade policies.
Now, a few months after Nvidia’s market cap peaked at $3.62 trillion in November 2024, it has decreased by $800 million and is hovering at $2.82 trillion.
President Donald Trump’s announcement of tariffs on Canada, Mexico, and China, postponed until early April, further intensifies market uncertainty. Such a bold move raises concerns about potential disruptions in semiconductor supply chains and potential retaliatory measures — issues that are particularly significant for Nvidia, which relies on a global production network.
Macroeconomic data have added to the complexity. US GDP for the last quarter of 2024 was revised upward to 2.3%, driven by a 4.2% consumer spending surge. However, persistent inflation, which remains above troubling levels, has dampened expectations for rate cuts. This blend of strong growth and stubborn inflation has left the Fed in a difficult position: stable economic growth and a steady labor market do not justify further rate hikes, yet high inflation makes expansionary policies risky.
In such an economic environment, growth tech stocks are especially vulnerable, particularly when overvalued. Nvidia reported quarterly revenues of $39.33 billion with 265% YoY return and Earnings per Share (EPS) of $7.18, beating Wall Street estimates.
Nonetheless, the market reacted with disappointment, considering these figures insufficient to justify the previous valuations of the Price-to-Earnings ratio, which was above 60 before the report. While long-term factors further destabilize the outlook, selling pressure continues.
Another reason for Nvidia’s stock decline is the Chinese startup DeepSeek, which shook the market by deploying AI models at 96% lower cost than Western standards. This eroded the perception of Nvidia’s technological monopoly in the AI GPU sector, where it once held a 95% market share.
Despite the recent sell-off, some respected analysts remain optimistic about Nvidia, suggesting it has the potential to continue its upward movement. Investors looking to evaluate whether Nvidia is still a buy can leverage a stock screener to assess key financial metrics, valuation ratios, and industry comparisons. Morgan Stanley’s forecast highlights Nvidia’s market dominance and expects a 60% Compound Annual Growth Rate in AI demand until 2030, with NVDA to reach $10 EPS.
Moreover, Nvidia’s diversification into sectors such as automotive and cloud computing offers additional resilience against sector-specific turbulence.
