Shares of chipmaker Nvidia (NVDA) are down this morning after investors grew worried about weaker demand for AI and the possibility of new trade restrictions on chips from the Trump administration. Super Micro (SMCI), which builds servers using Nvidia’s chips, lowered its forecast for revenue and profit in the third quarter. The company said some customers delayed their buying decisions, which pushed sales into the next quarter. Unsurprisingly, Super Micro’s stock cratered on the news, and led to fears that demand for AI-related hardware may be slowing.
Investors are also worried about a possible change to U.S. chip export rules. The Biden administration passed a rule in January to limit the number of AI chips countries can buy from the U.S. without a special license. That rule is set to start in May, but Reuters reported that Trump officials might replace it with a stricter version. Instead of using a tiered system, the new rule would require countries to sign special agreements with the U.S. government to buy chips, which could make exporting more difficult. Analysts say that these trade changes could hurt Nvidia.
Indeed, Citi’s Atif Malik said stricter rules could add uncertainty for the stock, while Bernstein’s Stacy Rasgon warned that they might push more buyers toward alternatives like Huawei. It is worth noting that both are five-star rated analysts. Nvidia is also facing possible tariffs of up to 25% on chips later this year. However, many Nvidia chips are imported through Mexico and would likely remain tariff-free under USMCA. In addition, CEO Jensen Huang is expected to meet with U.S. officials in Washington this week as the company tries to work through growing trade tensions.
Is NVDA a Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 35 Buys, five Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average NVDA price target of $167.09 per share implies 57.3% upside potential.
