In a dramatic turn of events, shares of Nvidia (NASDAQ: NVDA) plummeted nearly 8% on Wednesday, April 2, 2025, erasing approximately $22 billion in market value. This significant decline followed the Trump administration's announcement of a new tariff policy, which sent shockwaves through the tech sector and triggered widespread selloffs across various companies.
Nvidia, a key player in the graphics processing unit (GPU) market, relies heavily on overseas suppliers and manufacturing partners, making it particularly vulnerable to the impacts of these tariffs. As trade tensions escalate, the company faces potential retaliatory tariffs that could further squeeze its global operations and diminish its competitive edge.
Despite this tumultuous backdrop, top investor Julian Lin remains optimistic about Nvidia's long-term prospects. He believes that the recent stock sell-off presents a unique buying opportunity for investors looking to capitalize on the company's strong fundamentals. "Nvidia Corporation’s recent stock sell-off amidst AI and tech stock routs presents a buying opportunity due to its competitive positioning, strong balance sheet, and reasonable valuation," Lin asserts, emphasizing that the company's growth story remains intact.
Lin has assigned a Buy rating on NVDA shares, reflecting his confidence in the company's ability to rebound from recent setbacks. He notes that Nvidia's CUDA platform has fostered the largest developer community for accelerated computing, giving the company a significant competitive advantage that is unlikely to be easily replicated by rivals. "It will not be easy for competitors to catch up as they are many years behind, and it is not clear how they can win over developers to help them catch up," he adds.
Wall Street analysts largely echo Lin's bullish sentiment, with 39 Buy and three Hold ratings for Nvidia, resulting in a consensus rating of Strong Buy. The average price target for NVDA stock is currently set at $176.54, suggesting a potential upside of more than 60% in the year ahead.
However, the road ahead may be bumpy, particularly as Nvidia prepares for a critical date: May 15, 2025. This date marks the rollout of the U.S. government's new tiered AI chip export restrictions, known as the AI Diffusion Rule. Bank of America has cautioned investors about potential volatility leading up to this event, raising concerns about how these regulations could impact Nvidia's market exposure.
Nvidia has approximately 10% direct market exposure through its H20 GPU line, which could be affected by the AI Diffusion Rule. Nevertheless, analysts believe that the company's broader exposure to gaming, automotive, and workstation segments is unlikely to be significantly impacted.
As Nvidia navigates these challenges, the company's recent financial performance highlights its resilience. In its fourth-quarter earnings report, Nvidia posted record revenue of $39.3 billion, representing a 12% sequential increase and a staggering 78% year-over-year growth. This figure surpassed both the company's guidance and Wall Street's estimates.
Adjusted earnings per share (EPS) for the quarter came in at $0.89, exceeding expectations by $0.04. Notably, data center revenue hit a record $35.6 billion, reflecting a 16% quarter-over-quarter increase and a remarkable 93% year-over-year growth. The demand for Nvidia's Blackwell GPUs has been particularly strong, contributing significantly to the company's success.
Despite the impressive performance in the data center segment, Nvidia's gaming division faced challenges, with revenue declining 22% sequentially and 11% year-over-year to $2.5 billion. Management anticipates a rebound in this segment as supply chain issues are resolved.
In addition to its robust revenue growth, Nvidia has demonstrated a commitment to returning value to shareholders. The company repurchased $7.8 billion in shares and paid out $245 million in cash dividends during the fourth quarter, totaling $8.1 billion returned to shareholders.
Looking ahead, Nvidia projects first-quarter revenue of $43 billion, plus or minus 2%, indicating a 65% year-over-year increase and a 9% sequential rise. Analysts expect the company to deliver a 51.57% year-over-year increase in adjusted EPS to $4.53 for fiscal year 2026, with full-year revenue estimated to grow 56.62% to $204.39 billion.
In terms of valuation, NVDA stock appears attractive at current levels, trading at a forward price-to-earnings (P/E) ratio of 24.31x, slightly above the sector median but significantly below its five-year average. The company's forward price-to-earnings growth (PEG) ratio stands at 0.69x, indicating that the stock may be undervalued relative to its expected growth.
As Nvidia approaches the pivotal May 15 deadline, investors will be closely monitoring developments regarding the AI Diffusion Rule and its potential implications. With a strong consensus among analysts and a solid growth trajectory, Nvidia remains a compelling option for investors looking to capitalize on the ongoing AI revolution.
