Shares of Nvidia (NVDA 2.91%) are falling on Thursday. The company's stock was down 6.2% as of 1 p.m. ET and as much as 7.6% earlier in the day. The drop comes as the S&P 500 (^GSPC 1.81%) and Nasdaq Composite (^IXIC 2.06%) are seeing one of their worst days in years.
President Trump's new tariffs, announced yesterday after market close, are pressuring stocks across the market, but a key rating downgrade is also helping drive Nvidia lower.
President Trump's tariffs are announced
President Trump's so-called "Liberation Day" saw the announcement of sweeping new tariffs that were somewhat worse than many expected. While Trump set the tariff on imports from Taiwan -- where Nvidia's chips are manufactured primarily -- at a staggering 32%, Nvidia appears to have escaped direct tariffs for now, as the White House carved out an exemption for semiconductors.
However, the company and industry is far from out of the woods. The administration said that semiconductors "will be addressed separately," leaving the door open for tariffs on chips. Moreover, it's almost guaranteed that China and other major trade partners will respond to Trump's tariffs by implementing their own heavy-handed levies, or even placing key businesses like Nvidia on a "blacklist," restricting the ability to sell in these countries.
Nvidia gets a rare rating downgrade from a key analyst
HSBC analyst Frank Lee slashed his price target from $175 to $120 as he downgraded Nvidia's stock from a buy to a hold. Lee believes Nvidia will struggle to continue raising prices on its cutting-edge artificial intelligence (AI) chips, pointing to the lack of a significant bump for the newest B300 and GB300 Blackwell hardware.
"Increasing mismatches and inconsistencies in Nvidia's supply chain continue to grow, and hence we believe it would be difficult for our bull-case scenario, which suggests earnings upside potential, to materialize," Lee wrote, adding that while robotics and autonomous vehicles might be significant catalysts, "the market needs to see more revenue attribution emerge."
Despite the downgrade and the significant headwinds, I think Nvidia will be able to adjust and is still a buy. Expect some turbulence, however, given the uncertainty in the market.
