Nvidia Plunges on Tariffs, Market Selloff Amidst AI Growth Concerns

Nvidia's stock plummeted nearly 9% on Monday, mirroring a broader market downturn fueled by President Donald Trump's confirmation of impending tariffs from Canada and Mexico. The tech giant's shares retreated as the Dow Jones Industrial Average experienced a significant drop of 800 points, or 1.8%, while the Nasdaq Composite slid over 3%. This decline has pushed Nvidia's stock price back to levels observed in September, preceding the U.S. presidential election.

Market Capitalization Erosion

Nvidia's market capitalization, which had once soared past the $3 trillion mark, has now shrunk to $2.79 trillion following Monday's sharp sell-off, resulting in a staggering loss of $265 billion in valuation. Since Wednesday, when the company reported earnings that surpassed analysts' expectations across all metrics, Nvidia's stock has shed over 13% of its value.

Despite reporting impressive revenue growth of 78% year-over-year, reaching $39.33 billion, and exceeding analyst estimates, Nvidia faced concerns regarding the potential impact of U.S. tariffs on its operations. During the earnings call, Chief Financial Officer Colette Kress expressed uncertainty about the long-term implications of the tariffs, stating, "Tariffs at this point, it's an unknown until we understand further what the U.S. government's plan is."

Production and Export Concerns

Nvidia's primary manufacturing base for chips is in Taiwan, but some sophisticated systems and complete computers incorporating its chips are assembled in other regions, including Mexico and the United States. These facilities could be directly affected by Trump's newly imposed 25% duties on imports from Mexico and Canada, effective Tuesday.

Furthermore, Nvidia came under scrutiny for its exports to Singapore, with analysts suggesting that it might be utilizing the country as a transit point to ship its chips to China, thereby circumventing U.S. export controls. Recent events in Singapore, where authorities detained three individuals for providing false information regarding the destination of U.S.-manufactured servers, have heightened these concerns.

Domestic Manufacturing and Future Outlook

To mitigate potential disruptions, Nvidia has indicated its intention to manufacture chips within the expanded $100 billion facilities of Taiwan Semiconductor Manufacturing in the United States. This expansion, announced by Trump on Monday, signifies a strategic move towards domestic production.

Looking ahead, investors remain keenly interested in Nvidia's prospects for continued growth in artificial intelligence (AI) driven by major cloud companies, which account for approximately half of its data center revenue. CEO Jensen Huang has assured that the company has resolved issues with its latest chips, Blackwell, and expressed confidence in a strong upcoming quarter.

"We're going to have a good quarter next quarter," Huang stated during an interview with CNBC last week. "And we've got a fairly good pipeline of demand for Blackwell."