Nvidia Rises On Trump Tariff Reports; Is Nvidia A Buy Or Sell Now?

Nvidia (NASDAQ: NVDA) has been on a rollercoaster ride this year, with its stock price experiencing significant volatility. The latest twist in this saga came with President Trump's announcement of 25% tariffs on imports from Canada and Mexico, which sent shockwaves through the market. Nvidia's stock fell nearly 9% during Monday’s trading session, while the broader Nasdaq index declined by just over 2%. But is this a buying opportunity or a sign to sell?



First, let's consider the impact of the tariffs. Nvidia's chips are primarily manufactured by tsmc in Taiwan, which means that the core of Nvidia's operations—the high-margin GPU division—should remain mostly unaffected. However, some systems and computers utilizing these chips are produced in other regions, including Mexico, which could experience some impact. nvidia reported an adjusted gross margin of approximately 75.5% in 2024, indicating that the cost of its imported products is likely less than 25% of its revenues. Furthermore, since Nvidia generates around 47% of its sales from the U.S., the impact on its margins is probably even more constrained.

But the tariff story is just one piece of the puzzle. Nvidia is also facing investigations into Chinese buyers suspected of bypassing U.S. export controls on advanced semiconductor chips. This concern is substantiated by the fact that Singapore has emerged as Nvidia’s second-largest market, representing approximately $23 billion in sales in FY’25, or about 18% of revenue, compared to only $2.3 billion, or 8% of revenue, in FY’23. Singapore has now launched an investigation into these potential loopholes.

The emergence of China’s DeepSeek open-source AI model also suggests that the country is advancing significantly in AI, with both prominent startups and major companies like Alibaba and Baidu investing heavily in AI infrastructure. Should Chinese companies bypass sanctions and face stricter enforcement measures that eventually close these loopholes, Nvidia’s revenues could be affected.

Despite these challenges, analysts remain mostly bullish on Nvidia's stock. For example, Wedbush analysts have argued that Nvidia will benefit from DeepSeek; they argue that demand for AI and Nvidia's chips will increase as models become more efficient and less expensive. The average 12-month price target assessed by analysts is $177.4, with a high estimate of $220.00 and a low estimate of $135.00. This indicates that analysts expect Nvidia's stock to recover and potentially reach new highs.

But is Nvidia a buy or a sell now? The answer depends on your risk tolerance and investment horizon. If you're a long-term investor with a high risk tolerance, Nvidia's stock could be a good buy. The company's strong fundamentals, including its high gross margins and dominant position in the AI chip market, suggest that it has the potential for significant growth. However, if you're a short-term investor or have a low risk tolerance, you may want to wait for the dust to settle before making a move.

In conclusion, Nvidia's stock is a complex story with both bullish and bearish elements. The tariffs and investigations into Chinese buyers are certainly concerns, but the company's strong fundamentals and analysts' bullish sentiment suggest that it has the potential for significant growth. Investors should monitor the situation closely and consider their risk tolerance and investment horizon before making a decision.

Ask Aime: Is Nvidia a good buy now?