Nvidia (NVDA) has lost its momentum. Once one of the hottest stocks on the market, rocketing higher month after month and crashing through a $2 trillion valuation on its way to $3 trillion, has gone astray. Shares trade 33% below their all-time high.
Wall Street is also beginning to scale back their outlook on NVDA stock, cutting growth forecasts and lowering their price targets. With a series of headwinds looming, investors may be wondering when – or whether – Nvidia can grow to a $3 trillion valuation again.
The artificial intelligence chipmaker is confronting issues on a number of fronts, though most are tied to the trade war and President Trump's tariffs. While the problems first began under the prior administration, which imposed export controls to China on various advanced technologies, they have been dramatically ramped up with Trump.
For example, sky-high tariffs of 245% on Chinese imported goods had Beijing slapping equally outrageous tariffs on U.S. products, effectively closing off trade between the two countries. And while imports of computers, smartphones, and semiconductors have been temporarily exempted from them, additional bans on the export of the most advanced chips comes at a high cost to Nvidia: it announced it would take a $5.5 billion charge related to the tariffs in the first quarter.
Let's take a closer look at what Nvidia faces and whether NVDA stock can regain momentum and climb to a $3 trillion valuation again.
Export controls are Nvidia's latest hurdle. Having designed its H20 AI chip specifically for the Chinese market after its previous A800 chip had been banned under the Biden administration, Trump has now banned its export because of their potential to be used in or diverted to a Chinese supercomputer.
The massive writedown Nvidia is taking is for the inventory it had on hand, previously agreed to purchase commitments, and related reserves. The charge represents more than 15% of Nvidia’s fourth quarter data center revenue.
Nvidia isn't the only chipmaker having to deal with the crackdown on exports. Advanced Micro Devices (AMD) will also writedown $800 million related to its MI308 chips that were also banned.
UBS analyst Timothy Arcuri just cut NVDA stock target price from $185 to $180, though he did maintain a buy rating on the shares. He said the ban could result in a $9 billion revenue hit, with $700 million affecting fiscal Q1 results with the remaining $8 billion spread across the second and third quarters..
Tariffs are creating other problems. While not directly affecting Nvidia, they are causing a slowdown in AI spending. Earlier this month, for example, Microsoft (MSFT) announced it would be "slowing or pausing" some of its data center projects, including one in Ohio where it was spending $1 billion.
Nvidia, of course, is a supplier of chips and server equipment to many of these projects. They were to be built out using its latest Blackwell superchips, which can cost anywhere from $30,000 to $35,000 each. But because Nvidia doesn't sell the chips by themselves, but bundled with its Grace central processing units (CPU), the value of each sale is significantly higher.
The AI chip stock's server equipment can also range from $1.8 million for a mid-tier system up to over $3 million for a high-end one.
While Nvidia won't completely lose out on business, any softening of demand will hurt. For instance, while Microsoft's spending is easing, that's partly a result of its OpenAI partner now purchasing advanced accelerators on its own rather than through Microsoft.
Yet other buyers are starting to use more of their own in-house AI chips as a means of lessening their reliance upon Nvidia.
So, how serious is the situation for NVDA stock? In April alone, a number of analysts have revised their outlooks. HSBC downgraded their rating on NVDA from buy to hold while most others cut their price targets (there have been several that have reiterated their buy rating, too).
TD Cowen, Piper Sandler, DA Davidson, and Bank of America all lowered their targets.
On average, and including the USB lower target, the average price cut has been about 12%, making the consensus one-year outlook for NVDA $165.51 per share. That still implies 63% upside in the stock. With Nvidia trading at $101 per share, if NVDA was to rise to the consensus price, it would easily bust through the $3 trillion threshold again.
Nvidia is expected to report Q1 earnings on May 28. Wall Street is looking for revenue to grow 65% to $43.1 billion, generating profits of $0.92 per share, a 50% increase. If NVDA can exceed those forecasts as it has done many times, it could relight the fuse of its rocket ship.
Even meeting the forecast could allay concerns about Nvidia's future growth, meaning a $3 trillion valuation by the end of the year is well within the realm of possibility.
