Once-leading chip names like Nvidia and Super Micro Computer may tempt traders to buy the dip, but shareholders could be in for more pain as the artificial intelligence revolution takes a back seat to tariff concerns. Nvidia stock and SMCI stock are now in major downtrends after achieving eye-popping gains the past few years.
Tariffs imposed by the Trump Administration on chip producing hubs like Taiwan and South Korea are causing a reckoning as semiconductor companies assess the trade war's impact on demand and manufacturing. While semiconductors are exempt from immediate reciprocal tariffs, products that contain chips are subject to the higher rates.
The market uncertainty is adding to pain already facing chipmakers, with Nvidia stock down more than 23% year to date and hitting its lowest levels in seven months. SMCI stock, while still up 5% year-to-date, is trading more than 70% below its all-time highs from last spring.
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Why Nvidia Stock Isn't Buyable Just Yet
Nvidia stock investors hoping to call a bottom should exercise caution at current levels. "Don't be buying on the way down because you think it's a good deal," Brian Shannon, founder of Alphatrends.net, told Investor's Business Daily's "Investing with IBD" podcast.
He says it's more likely the stock will see longer-term moving averages flatten out. "It's either going to scare you out or it's going to turn sideways for three, six months," said Shannon.
A smarter move, Shannon says, is to buy into Nvidia stock once it shows signs of a confirmed uptrend by getting back above rising moving averages. "You don't have to buy the low," said Shannon. "The low is only known in hindsight."
Shannon says SMCI stock could also see a prolonged decline and sideways action owing to the semiconductor industry's market leadership waning. "SMCI is likely going to take some time," he said. "It's no different than what all of these markets have done over and over again."
"That's just the way the cyclical nature of money flows through these markets," he said. "You've got to give them time."
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Tariffs Slam International Trade, Investor Sentiment
Markets remain bearish, with a pervasive risk-off mood permeating the trading tape over tariff uncertainty. The big question is whether the tariffs are a permanent part of trade with the U.S. or a negotiating tactic and if carve-outs or reversals are possible.
On Wednesday, President Donald Trump announced tariffs of 32% on goods arriving from Taiwan and 25% from South Korea. In a later statement, the Trump Administration said semiconductors would not be subject to reciprocal tariff rates.
However, there is no exemption for products and finished goods that contain semiconductors like appliances and electronics, potentially creating a headache for companies with products that rely on chips. The protectionist policies from the U.S. are also increasing the chances of retaliatory measures from other countries, leading to fears among investors of a larger trade war.
Follow Mike Juang on X at @mikejuangnews and on Threads at @namedvillage.
