The escalating trade tensions between the United States and China, which more recently focused on electric vehicles (EV) and solar panels, have circled back to a familiar flashpoint between the two countries: semiconductor chips. Citing national security concerns, the U.S. unleashed a plethora of export control rules in October 2022 targeting China, the largest exporter of chips in the world – but the clampdown proved ineffective, as friendly nations like Japan and the Netherlands have continued to supply crucial semiconductor manufacturing equipment.
As a result, the U.S. has tried different approaches to choke off China’s access to advanced semiconductor technology, culminating in Wednesday’s reports that the Biden administration is considering the most severe trade restrictions available if companies like Dutch giant ASML (ASML) continue to ship to China.
Those reports coincided with hawkish comments from GOP presidential nominee Donald Trump on Taiwan, home to industry critical Taiwan Semiconductor (TSM), the world’s largest chip manufacturer. Trump told Bloomberg, “They did take about 100% of our chip business. I think, Taiwan should pay us for defense… You know, we’re no different than an insurance company. Taiwan doesn’t give us anything.”
With both Biden and Trump talking tough on chips and China, most of the semiconductor industry spiraled sharply lower on Wednesday – with the notable exception of Intel (INTC), which is expected to benefit as it continues to expand its domestic foundry footprint. U.S.-listed shares of Taiwan Semi tumbled nearly 8%, ASML lost 12%, and Advanced Micro Devices (AMD) shed more than 10%, while the broader VanEck Semiconductor ETF (SMH) closed down 7%.
So where does this leave Nvidia (NVDA), with the poster child of the AI revolution taking a 6.6% hit on the session? Should investors give the Jensen Huang-led company a wide berth amid the candidates’ saber-rattling on trade – or is the stock’s latest dip an opportunity to load up on Nvidia shares? Let’s have a closer look.
About Nvidia Stock
For the uninitiated, Nvidia (NVDA) is a leader in specialized AI semiconductors, and the company also supplies software to support the hardware it provides. More specifically, Nvidia designs and sells graphics processing units (GPUs) for the gaming and professional markets, and system-on-a-chip (SoC) units for the mobile computing market.
Trading under a dollar as recently as 2016, the stock recently completed a 10-for-1 stock split to bring its share price back down to earth. Nvidia is up an impressive 146% on a YTD basis, and the chip giant has surged a staggering 2,595% over the past five years.
Last month, NVDA briefly took over the No. 1 spot as the most valuable company in the world, elbowing past Big Tech titans like Microsoft (MSFT) and Apple (AAPL). With Apple now back in the top spot, Nvidia’s market cap currently stands at a formidable $2.90 trillion. The stock also offers a modest dividend yield of 0.02%.
Although the stock’s 16% pullback from its June highs might feel alarming, given NVDA’s near-vertical rise over the past year, the core fundamentals and operational strength of the company remain firmly intact.
Nvidia Crushes Earnings Expectations
Nvidia’s financial position remains as solid as ever, as can be gauged from its latest results for the first quarter. In Q1 2025, Nvidia continued its impressive run of beating revenue and earnings expectations.
Specifically, the company reported record quarterly revenues of $26 billion, up a whopping 262% from the previous year, as its core data center revenues shot up by 427% in the same period to $22.6 billion. Nvidia’s adjusted EPS rocketed by 461.5% on a YoY basis to $0.61, comfortably beating estimates.
The company generated net cash from operating activities of $15.34 billion, compared to just $2.91 billion in the year-ago quarter. Moreover, Nvidia closed the quarter with a cash balance of $31.44 billion, much higher than its debt levels of $14 billion.
Nvidia has been on a tear for the past five quarters. Not only have they consistently beaten analyst expectations, but they’ve also delivered impressive quarterly earnings growth.
For Q2 2025, set to be reported in late August, the company expects revenues of $28 billion. Analysts are forecasting forward revenue growth of 80.21% for Nvidia, compared to the tech sector median of 6.57%.
Overall, the past 10 years have seen the company grow its revenue and EPS at a CAGR of 33.99% and 56%, respectively.
Alongside its quarterly results, Nvidia announced its 10-for-1 stock-split to attract more investors to its stock, which set off a wave of similar announcements in the industry.
Blackwell & Other Drivers
Nvidia unveiled its Blackwell platform of chips in March, and the company is betting big on it. Touted as an improvement over its Hopper architecture, launched two years ago, the Blackwell platform boasts significant improvements in cost and energy efficiency compared to its predecessor. (As context, each of Nvidia’s H100 chips consumes 700W of energy at peak operation, which is more than the annual electricity consumption of countries like Georgia, Costa Rica, and Guatemala.)
Enter Nvidia’s Blackwell platform, which was launched earlier this year. It promises to slash costs by up to 25x for tasks like training giant AI models, saving significant power for the same performance. Production is underway, with availability coming later in 2024. And Nvidia isn’t resting; Blackwell’s successor, Rubin, is already in the works for a 2026 launch.
Looking ahead, management is confident in continued growth through 2025 and beyond. This optimism is fueled by the shift to accelerated computing, an explosion of generative AI applications, strong growth in enterprise and consumer internet sectors, and the development of sovereign AI. The company’s bullishness stems from the fact that Nvidia’s chips are used for various purposes such as data centers, edge-to-cloud computing, the powering of automotive driving technology, cryptocurrency mining, and professional applications.
Nvidia’s H100 Tensor Core GPU is used as the foundation for artificial intelligence usage on the data center level. This GPU was the fastest available in the market, and therefore in particularly high demand among companies that require a fast tackling of AI and HPC workloads. Nvidia is currently the leading AI processor manufacturer, with its AI accelerator MI300X to support machine learning set to be made available to users soon.
The chip giant has software muscle, too. Their Nvidia Inference Microservices (NIMs), unveiled at GTC this year, are production-ready containers that simplify deploying AI models at scale. NIMs slash deployment times from weeks to minutes, according to Nvidia. They work across Nvidia’s massive CUDA-enabled GPU base of hundreds of millions and support a wide range of models, including open-source options like Meta’s (META) Llama 3.
Bullish Analysts Back Nvidia
As semi stocks sold off on Wednesday, Mizuho Securities analyst Jordan Klein advised investors not to panic, and remarked, “My personal take is not to freak out and start indiscriminately selling semis with reckless abandon. A pullback and risk-off trade into July earnings season IS GOOD IN MY VIEW to lower expectations and very elevated and euphoric investor positioning/sentiment in the semi sector.”
Considering its strong balance sheet, continued innovation, and robust market standing, Nvidia’s latest dip can be an opportunity for long-term investors to load up on the stock.
Overall, analysts continue to remain bullish about Nvidia stock, even as they’ve struggled to keep up with price-target hikes post-stock split. The consensus rating is a “Strong Buy,” with a mean target price of $139.41, indicating an upside potential of about 16.7% to current prices.
Out of 40 analysts covering NVDA stock, 34 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 4 have a “Hold” rating.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
