The stock market is reeling from a significant downturn as fears of a global trade war escalate following President Donald Trump's announcement of sweeping tariffs. On April 4, 2025, the Dow Jones futures plummeted by 1,400 points, leading to widespread losses across major tech stocks, including Nvidia, Apple, and Tesla.
In the wake of these developments, Nvidia (NVDA) and Super Micro Computer (SMCI) stocks have entered major downtrends after experiencing remarkable gains in recent years. The S&P 500 index dropped by 4%, while the tech-heavy Nasdaq Composite fell by 5%. Nvidia, once a standout performer in 2024, saw its shares decline by 6% on April 3, 2025.
Mary Ann Bartels, chief investment strategist at Sanctuary Wealth, commented on the dire situation, stating, "This was the worst-case scenario for tariffs and were not priced into the markets. The big question is if 5,500 can hold on the S&P 500. If it cannot hold, we may see another 5-10% downside." The uncertainty surrounding tariffs is putting pressure on an already struggling U.S. economy, raising concerns about inflation and a potential slowdown.
Nvidia's stock has been under strain for weeks, with its share price down a staggering 26% from its peak in January 2025. This decline comes despite the company reporting fiscal Q4 revenue of $39.3 billion in February, marking a 78% surge from the previous year. However, the growth has significantly slowed compared to the 265% increase reported a year earlier.
Despite Nvidia CEO Jensen Huang repeatedly emphasizing the "extraordinary" demand for the company's latest chip, Blackwell, the company is facing challenges keeping up with this demand. The pressure on profit margins is becoming increasingly evident, as Nvidia reported a non-GAAP gross margin of 73.5% for the quarter, which is 3.2 points lower than the previous year. The decline in margins has been attributed to the introduction of newer, more complicated, and costly data center products.
Further complicating matters, Nvidia's supply chain is heavily concentrated in the Asia-Pacific region, making it vulnerable to potential retaliatory tariffs and trade war escalations. Although the White House has indicated that semiconductors will not be subject to the latest tariff, Nvidia's business could still be adversely affected, as more than half of its revenue is generated from sales outside the United States.
Analysts on Wall Street are increasingly skeptical about Nvidia's pricing power. In a recent report, HSBC downgraded Nvidia from Buy to Hold, reducing its price target from $175 to $120. The analyst expressed concerns about limited GPU pricing power, which could cap earnings upside potential until new opportunities emerge in robotics, automotive, and AI markets. The firm noted, "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."
As of April 3, Nvidia's stock was trading at $103, reflecting the market's growing apprehension regarding the company's future performance. The tech sector, once buoyed by the AI revolution, now finds itself grappling with the ramifications of trade policies and economic uncertainty.
In summary, the combination of President Trump's tariff announcements and the subsequent market reactions have cast a shadow over the tech industry, with Nvidia feeling the brunt of these developments. Investors are left to ponder the future of the stock market and the potential for further declines as the situation unfolds.
