TLDR
- NVIDIA stock has dropped 19% year-to-date despite strong 2024 performance
- New export license requirements for H20 AI chips to China will cause a $5.5 billion sales hit
- Alphabet confirmed plans to invest $75 billion in capital expenditures in 2025
- Investor “Stone Fox Capital” rates NVDA a Buy, with Wall Street maintaining a Strong Buy consensus
- Market is watching Big Tech earnings this week from Meta, Microsoft, Amazon, and Apple for capital expenditure plans
NVIDIA’s stock has faced a challenging 2025 so far, dropping 19% year-to-date after its stellar performance in 2024.
The chipmaker is dealing with several headwinds, including concerns about AI infrastructure spending and new export restrictions to China.
Despite these challenges, many analysts remain bullish on the company’s long-term prospects in the AI market.
The stock was trading slightly up in premarket activity on Tuesday, gaining 0.1% to reach $108.82. This comes after a 2.1% drop on Monday.
One of the main concerns weighing on NVIDIA has been uncertainty about future AI infrastructure spending by major tech companies.
Competition and Regulatory Hurdles
NVIDIA is also facing growing competition in China. Huawei is planning to test its Ascend 910D artificial-intelligence chip with domestic Chinese customers, with first samples expected next month.
In another blow, the Trump administration recently informed NVIDIA that it will need export licenses to sell its H20 AI chips to China.
The company has acknowledged this regulatory change will cause a $5.5 billion sales hit for the recently concluded quarter.
These challenges come at a time when some investors are worried about potential pullbacks in spending by major tech companies.
Reports have suggested some tech giants may be taking a more cautious approach to capital expenditures in the near term.
Microsoft, for example, canceled several data center leases in Ohio, leading to questions about AI infrastructure investment plans.
However, both Amazon and Microsoft have publicly stated they aren’t changing their AI spending plans.
Jamie Meyers, senior analyst at Laffer Tengler Investments, addressed the Microsoft lease cancellations: “Entering/exiting contracts is normal course of business when you’re laying out $80 billionânot all contracts will come to fruition for one reason or another.”
Big Tech Spending Remains Strong
In more positive news for NVIDIA, Alphabet recently confirmed it plans to invest $75 billion in capital expenditures in 2025.
This level of spending from one of NVIDIA’s major customers suggests demand for AI chips remains robust.
The market is now closely watching earnings reports from other tech giants. Meta Platforms and Microsoft will report on Wednesday, followed by Amazon and Apple on Thursday.
Capital expenditure plans will be among the most closely watched metrics in these reports, as they could provide insights into future demand for NVIDIA’s products.
One investor, known by the pseudonym Stone Fox Capital, believes the recent pullback represents a buying opportunity.
“Whether the Chinese chip issue is resolved in the short term, investors need to focus on the bigger picture. The data center market size is forecast to triple from nearly $350 billion in 2024 to over $1,000 billion in 2034,” the investor stated.
Stone Fox rates NVIDIA shares a Buy, suggesting investors “use the yearly low in the stock to buy Nvidia at a discount to the growth rate.”
This view appears to align with the broader Wall Street consensus. NVIDIA currently enjoys a Strong Buy rating, with 35 Buy recommendations and just 5 Hold ratings.
The 12-month average price target stands at $167.09, suggesting a potential upside of approximately 54% from current levels.
Other chip makers were also showing positive movement in premarket trading, with Advanced Micro Devices rising 0.4% and Broadcom gaining 0.1%.
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