Nvidia (NVDA) Stock: Trade War Casualties Mount As Huang Rushes To Asia

TLDR:

Table of Contents

Nvidia stock fell 2.6% in premarket trading Monday, marking a potential third consecutive day of declines
CEO Jensen Huang met with Japanese and Chinese leaders amid increasing US-China trade tensions
Nvidia recently disclosed that exporting H20 AI chips to China would require US government licenses, resulting in a $5.5 billion charge
Despite recent drops, Nvidia has the second-lowest PEG ratio (1.02) among “Magnificent Seven” stocks
Chinese company Huawei plans to ship its 910C AI chip, comparable to Nvidia’s older H100, to Chinese customers next month

Nvidia’s stock continued its downward trend Monday morning, dropping 2.6% to $98.80 in premarket trading as the chipmaker faces mounting pressure from US-China trade tensions. This marks what could be the third straight day of declines for the AI chip giant, following a 2.9% drop on Friday.

The broader tech market also showed weakness. Futures tracking the Nasdaq 100 fell 1.1% as investors weighed increasing global trade concerns.

CEO Jensen Huang has been on a diplomatic tour through Asia, meeting with Japanese Prime Minister Shigeru Ishiba on Monday. This followed his Thursday meeting with Chinese leaders in Beijing.

During his visit to China, Huang met with Ren Hongbin, head of the China Council for the Promotion of International Trade. According to Chinese state broadcaster CCTV, Huang emphasized that “China is a very important market for Nvidia.”

Export Restrictions Impact

The CEO’s Asian visits come at a critical time. Less than a week ago, Nvidia disclosed that future exports of its H20 artificial-intelligence chips to China would require a US government license.

This regulatory hurdle will cost the company. Nvidia announced it would take a $5.5 billion charge in the first fiscal quarter as a result of these export restrictions.

The news triggered a nearly 7% drop in Nvidia’s stock in the following trading session. However, some analysts have noted that China was already becoming a smaller part of Nvidia’s overall business.

Adding to the competitive landscape in China, Huawei Technologies is preparing to begin mass shipments of its own AI chip. Reuters reported Monday that Huawei’s 910C AI chip, which offers performance comparable to Nvidia’s older H100 chip, could start shipping to Chinese customers as early as next month.

Valuation Perspective

Despite recent stock declines, Nvidia presents an interesting valuation case. The chipmaker currently has a trailing 12-month price-to-earnings ratio of 35.5, making it appear expensive at first glance.

This P/E ratio is the second-highest among the “Magnificent Seven” tech stocks, with only Tesla’s ratio of 118.4 exceeding it.

Looking at forward earnings paints a different picture. Nvidia trades at approximately 23.3 times forward earnings, making it the third most affordable of the Magnificent Seven on this metric.

Only Alphabet (Google’s parent company) and Meta Platforms have lower forward earnings multiples among this elite group of tech stocks.

Growth Prospects

The price-to-earnings-to-growth (PEG) ratio offers yet another perspective. This metric factors in analysts’ projections for earnings growth over the next five years.

Nvidia’s PEG ratio stands at just 1.02, nearly tied with Meta Platforms (1.01) for the lowest among the Magnificent Seven stocks. This suggests Nvidia could be undervalued relative to its growth potential.

Nvidia’s share price has fallen more than 30% from its early 2025 high. Several factors contributed to this decline.

In January, Chinese AI company DeepSeek introduced a powerful large language model developed at a low cost. This raised questions about future demand for Nvidia’s premium-priced GPUs.

President Trump’s tariffs also triggered a major sell-off in tech stocks, with Nvidia among those hit hardest. Most recently, the US restrictions on exports of Nvidia’s H20 AI chips to China resulted in the $5.5 billion charge.

Despite these challenges, many Wall Street analysts maintain optimistic earnings growth expectations for Nvidia. The company’s largest customers, including several fellow Magnificent Seven companies, continue to invest heavily in AI infrastructure.

Nvidia’s GPUs remain the most powerful chips for running AI models, especially with the recent launch of its new Blackwell platform. The company also sees growth beyond AI.

CEO Jensen Huang believes the industry shift from general-purpose computing to accelerated computing represents a $1 trillion opportunity for Nvidia.

While some experts like NYU finance professor Aswath Damodaran (known as the “Dean of Valuation”) think Nvidia remains overvalued by roughly 23%, others see the recent sell-off as a buying opportunity for long-term investors focused on AI growth.

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