Nvidia Stock Sinks, Despite Record Profit, On Trump Tariff Fears

AI chip making mainstay Nvidia saw its stock drop despite record earnings because it is dependent on Taiwan manufacturing which could be severely impacted negatively if tariffs being contemplated by the incoming US administration are imposed. JL

Shannon Najmabadi reports in the Washington Post:

Nvidia’s shares sank 2% in after-hours trading Wednesday after the AI chip maker posted quarterly earnings that beat estimates but failed to convince investors it could maintain the huge recent growth. Nvidia is the top supplier of chips that power generative AI tools like OpenAI’s ChatGPT and stock energy-hungry data centers. Nvidia’s business, which draws significant revenue from China and depends on Taiwan Semiconductor Manufacturing to build its GPU chips, faces uncertainty under President-elect Donald Trump’s future trade policies. He has proposed blanket tariffs on all imported goods and said Taiwan “stole our chip business.” 

Nvidia’s shares sank about 2 percent in after-hours trading Wednesday after the artificial intelligence chip maker posted quarterly earnings that beat estimates but apparently failed to convince investors it could maintain the huge recent growth that has made it one of the world’s most valuable companies.

 

Nvidia’s business, which draws significant revenue from China and depends on Taiwan Semiconductor Manufacturing to build its GPU chips, faces potential uncertainty under President-elect Donald Trump’s future trade policies. He has proposed blanket tariffs on all imported goods and said Taiwan “stole our chip business.”

Nvidia reported $35.1 billion in revenue for its third quarter ending Oct. 27, up 94 percent from the same period last year. The company anticipates about $37.5 billion in revenue next quarter.

 

Nvidia is the top supplier of chips that power generative AI tools like OpenAI’s ChatGPT and stock energy-hungry data centers. The company could benefit from Trump’s promises to enable AI development in the United States. He is expected to repeal a Biden-era executive order that he has said “hinders” AI innovation, and he said his energy policies will help meet the huge energy demands of data centers.

Nvidia founder and CEO Jensen Huang was asked on an investor call Wednesday about the potential effects on his company of any tariffs imposed by Trump, a question that has also been raised by some analysts. “Whatever the new administration decides, we will, of course, support the administration,” Huang said.

Nvidia originally created its GPU chips, or graphics processing units, to render video game graphics. It still leads in that market but pivoted to also focus on AI after its products emerged as crucial to the machine-learning technology that powers capabilities such as image recognition and chatbots.

 

The company now dominates the AI chip market with a market capitalization of more than $3 trillion. Its earnings reports are highly anticipated as a barometer for the tech industry, the prospects for AI development and broader market sentiment.

Nvidia stock is one of the few ways amateur investors have found to directly cash in on the hype around AI, as many AI companies are private start-ups.

Dan Ives, global head of technology research at Wedbush Securities, said Nvidia’s latest earnings showed its business looking strong. “These chips are the new gold and oil.”

Other analysts said the company could be challenged by competition from other chip makers and supply constraints on the production of Nvidia’s next-generation Blackwell chip. “There’s little room for execution missteps in 2025,” said eMarketer analyst Jacob Bourne.