Nvidia Faces Revenue Risks Amidst Trade War Tensions

Nvidia's revenue under pressure due to trade war risks. Experts caution investors as up to 30% of sales tied to China may be jeopardized. A multibillion charge may loom for the company this quarter.

Date: 26-04-2025

AI Rating: 4

Nvidia's performance has been significantly impacted this year, with stock values plunging over 30% since the start of 2025, wiping away $1 trillion in market capitalization. Despite the downturn, the company’s end markets, particularly in the data center and AI sectors, are experiencing substantial growth, which contrasts with the bearish stock performance.

Significantly, the ongoing trade war between the U.S. and China presents a critical risk to Nvidia's revenue, with estimates suggesting that up to 30% of the company’s sales could be affected. Recent regulatory changes may necessitate that Nvidia obtains licenses to export AI chips to China, which previously constituted roughly 14% of its sales, though some estimates suggest this might actually be as high as 30% when including indirect sales via Singapore.

This potential loss of revenue is alarming, especially as Nvidia may incur a multibillion-dollar charge related to its H20 chips, which could substantially impact earnings. Chinese firms recently placed large orders for these chips, adding further complexity to the situation. Additionally, local competitors like Huawei are ramping up their capabilities to fill any potential void, particularly as the Chinese government looks to reduce reliance on foreign technology.

Evaluating Nvidia's current valuation metrics shows that its shares are now trading at 18.4 times trailing sales and 11.7 times forward sales, a drop from 30 times sales at the year’s kickoff. However, the risk posed by losing the Chinese market is considerable and could impede long-term growth further if not resolved. Investors should closely monitor developments related to these export regulations and their potential impact on Nvidia’s market share.

Stocks: NVDA