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The ongoing trade tensions between the United States and China are once again making headlines. President Donald Trump imposed an additional 10% tariff on Chinese imports this week, bringing total U.S. tariffs on China to 20% and further escalating the economic standoff between the world’s two largest economies.
Nvidia (NVDA), a dominant player in the AI chip market, has been increasingly caught in the crossfire of the U.S.-China trade war. Despite these challenges, the company continues to deliver exceptional financial results. NVDA remains at the forefront of the AI revolution, with its new Blackwell architecture solidifying its competitive edge. However, investors must determine whether its strong fundamentals are enough to offset the potential fallout from the trade war.
With that in mind, is now the time to sell NVDA stock, or should investors stay the course? In this article, we take a deep dive into the latest developments and what they mean for Nvidia’s future.
About Nvidia Stock
Nvidia (NVDA) is a premier technology firm known for its expertise in graphics processing units and artificial intelligence solutions. The company is renowned for its pioneering contributions to gaming, data centers, and AI-driven applications. NVDA’s technological solutions are developed around a platform strategy that combines hardware, systems, software, algorithms, and services to provide distinctive value. It currently has a staggering market cap of $2.83 trillion.
Shares of the chipmaker have faced challenges this year as sentiment toward the AI boom has grown increasingly cautious, burdened by concerns ranging from the emergence of DeepSeek to America’s trade war with China. NVDA’s stock is down 12.7% year-to-date.
Is America’s Trade War with China a Significant Threat to NVDA?
Nvidia executives expressed caution regarding the chipmaker’s China business during its earnings call last Wednesday. Geopolitical tensions with China have already affected Nvidia’s financial performance, with CEO Jensen Huang stating that the company’s China sales have dropped by half since the U.S. imposed export controls on its chips to the country. Notably, NVDA’s sales in China now account for approximately 15% of its total revenue.
When it comes to Trump’s stance on China, Nvidia’s CFO, Colette Kress, stated that the company is awaiting further clarity on his tariff plans and their potential impact on its outlook. “It’s an unknown until we understand further what the U.S. government’s plan is, both its timing, it’s where, and how much. At this time, we are waiting,” Kress said. Still, Kress suggested that Trump’s stance on China could affect the company’s future earnings from the country when she said, “Absent any change in regulations, we believe that China shipments will remain roughly at the current percentage.” As noted in my previous article about NVDA, escalating tariffs between the U.S. and China could affect the chipmaker since China represents 20%-25% of its data center revenue, which is Nvidia’s largest source of income.
Meanwhile, in late January, Bloomberg reported that officials from the Trump administration were considering further restrictions on the company’s exports to China. The updated restrictions would now include Nvidia’s H20 GPUs, which are used for developing and operating AI software and services, according to the report. This chip, specifically designed for China under U.S. export controls, is the most powerful among the three China-focused chips that Nvidia has developed. Notably, Reuters recently reported that Chinese companies are increasing orders for the H20 AI chip, driven by the surging demand for DeepSeek’s low-cost AI model. While this may benefit NVDA in the short term, it could also hasten the implementation of new restrictions, potentially targeting the H20 AI chip or other China-specific chips to limit the country’s efforts to enhance its AI capabilities. Notably, Trump administration officials were also in early discussions about further tightening restrictions on the volume of AI chips that can be exported globally without a license.
It is also important to note that Trump is considering tariffs of “25% or higher” on all semiconductor chips imported into the U.S., with rates expected to “go very substantially higher over a course of a year.” Tariffs on chips would significantly impact Nvidia, which depends on foreign partners for its semiconductor manufacturing. Notably, Huang visited the White House in late January and reportedly discussed ways to strengthen “U.S. technology and AI leadership.” Trump told reporters that he had a productive meeting with Huang but emphasized that “eventually we’re going to put tariffs on chips.”
Another key point to consider was outlined in a recent report from the Wall Street Journal. According to the report, Chinese buyers have been purchasing Nvidia’s latest AI chips, with Blackwell-equipped systems being redirected through third-party vendors in nearby regions. Resellers are buying servers equipped with Nvidia’s offerings from companies in Malaysia, Taiwan, and Vietnam by using entities registered outside of China. This highlights the challenges the Trump administration faces in restricting access to cutting-edge American technology and stokes expectations of stricter regulations, which could ultimately affect NVDA.
Despite all this uncertainty, some Wall Street analysts are attempting to soothe investor nerves. Wedbush Securities analysts stated that the Trump administration’s stance on China is unlikely to have a significant impact on Nvidia’s business. “Our view is ultimately the bark will be worse than the bite with China tariffs/export controls and this is all a game of high stakes poker to drive a deal with China at the negotiating table sometime in 2025,” analysts led by Dan Ives wrote in a note.
NVDA Slips Despite Impressive Q4 Results
On Feb. 27, shares of NVDA slumped over 8%, even after the semiconductor giant posted Q4 results and Q1 revenue guidance that exceeded expectations. Some Wall Street analysts noted that the earnings beat wasn’t significant enough to inspire investors, as sentiment remained weak due to concerns over DeepSeek R1 advancements. Other analysts attributed the post-earnings decline to growing risks from tighter export controls and tariff pressures. However, let’s examine the latest results in detail to determine if there are any fundamental reasons for concern.
Nvidia posted record quarterly revenue of $39.3 billion for its fourth quarter of its fiscal 2025, up 12% sequentially and up 78% year-over-year. The top line exceeded Wall Street estimates by $1.17 billion. For the full year, revenue surged 114% to a record $130.5 billion. Its fourth-quarter adjusted EPS stood at $0.89, beating expectations by $0.04.
Notably, data center sales, accounting for 90.6% of total revenue, reached a record $35.6 billion in Q4, marking a 16% increase from the previous quarter and a 93% surge year-over-year. Blackwell sales made up 31% of data center revenue, while cloud service partners contributed half. “Demand for Blackwell is amazing as reasoning AI adds another scaling law - increasing compute for training makes models smarter and increasing compute for long thinking makes the answer smarter,” said Huang.
Looking at the other parts of the business, the Automotive and Robotics segment was a bright spot, with revenue climbing 27% sequentially and 103% year-over-year to $570 million in Q4. This exceptionally strong performance indicates that rising chip demand for autonomous vehicles is offering robust support. Professional visualization revenue increased 5% sequentially and 10% year-over-year to $511 million, though the growth was not particularly impressive. However, gaming revenue fell 22% quarter-over-quarter and 11% year-over-year to $2.5 billion, partially due to supply chain issues. Management said that they anticipate strong sequential growth in Q1 as supply increases. Overall, it’s clear that NVDA delivered outstanding results.
Meanwhile, sales to China remained substantial in FY25, rising 66% year-over-year to $17.1 billion. However, it still represented a decrease from 16.9% of total revenue in FY24 to 13.1% in FY25. With that, additional export controls are highly likely to further reduce Nvidia’s revenue share from China. Still, the company will undoubtedly continue to develop solutions for the Chinese market within the constraints of export controls, allowing it to keep benefiting from China’s substantial market opportunity.
Looking ahead, Nvidia projects Q1 revenue of $43 billion, plus or minus 2%, representing a 65% year-over-year increase and 9% sequential growth. Obviously, sales growth is leveling off due to the law of large numbers, but in absolute terms, it remains solid. GAAP gross margins are expected to be 70.6%. This marks a decrease from 75% in FY25, as the company is currently ramping up Blackwell, which should not be a cause for concern.
Analysts tracking the company forecast a 50.37% year-over-year increase in its adjusted EPS to $4.50 for fiscal 2026, with revenue estimated to grow 56.40% from the previous year to $204.1 billion.
Notably, after a recent pullback, NVDA’s valuation multiples look much more attractive. For example, the stock currently trades at a forward P/E ratio (Non-GAAP) of 25.8x, only slightly above the sector median of 22.13x and significantly below its five-year average of 47.89x.
What Do Analysts Expect for NVDA Stock?
Despite concerns over a global trade war, Wall Street analysts remain overwhelmingly bullish on Nvidia, as reflected in its consensus “Strong Buy” rating. Among the 44 analysts covering the stock, 38 recommend a “Strong Buy,” two suggest a “Moderate Buy,” and four give a “Hold” rating. The mean price target for NVDA stock is $178.07, indicating potential upside of 51.8% from current levels.
The Bottom Line on NVDA Stock
To sum up, I don’t think investors should sell NVDA stock right now. First of all, there are many unknown variables regarding tariffs and their eventual impact, and even NVDA’s executives have adopted a wait-and-see approach. Therefore, it wouldn’t be prudent to hastily hit the sell button until more clarity emerges.
Secondly, the company remains fundamentally strong, and its recent quarterly results were impressive. Its Blackwell architecture ensures the company’s strong position in the AI market, even amid increasing competition. Finally, NVDA’s valuation has become much more attractive. With that, the optimal strategy in the current environment is to hold NVDA stock and see how things unfold.
