Nvidia shares fall further after tariff hit

Nvidia’s shares are enduring a challenging 2025 so far, and with semiconductor tariffs under review, more bad news could be on the way

The office building of Nvidia Corporation in Neihu Technology Park, Taipei
(Image credit: BING-JHEN HONG via Getty Images)

Nvidia’s shares opened 6.3% down on 3 April, with the stock down 25.6% for the year at that point.

The semiconductor giant – for years one of the most popular stocks on the market – has endured a torrid run through 2025 so far. Nvidia’s decline has also brought the S&P 500 down, given that it has at various points in recent years been the world’s largest company by market capitalisation.

On top of multiple headwinds that Nvidia (NASDAQ:NVDA), as well as its Magnificent Seven colleagues, has had to contend with through the first quarter, Nvidia’s shares endured a further hit following ‘Liberation Day’, when US president Donald Trump announced his tariff regime for the US’s trading partners.

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“While semiconductors are currently exempt from some tariffs, the broader market reacted negatively due to continued uncertainty, growth slowdown implications and potential retaliatory measures from affected countries,” said Lale Akoner, global market analyst at trading platform eToro.

“The semiconductor industry especially faces uncertainty as companies gauge the impact of these tariffs on their operations and supply chains.”

How will tariffs impact Nvidia?

There hasn’t been an industry-specific tariff on semiconductor imports announced yet, though this is an area under review. Economists at Capital Economics expect that a 25% tariff on semiconductor imports will come into effect after consultation.

The tariff regime as it currently stands will already have a major impact on Nvidia, though, because of how complex and global its supply chain is – especially given the centrality of Taiwan, which was hit with a 32% tariff on ‘Liberation Day’.

“This has significant implications for Nvidia and other semiconductor companies that rely heavily on TSMC for chip production,” says Akoner. “Around 90% of the world’s most advanced semiconductors, including mobile processors, AI GPUs, and high-performance computing chips, are manufactured in Taiwan by Taiwan Semiconductor Manufacturing Co (TSMC).”

The stated objective of tariffs in general is to encourage manufacturers to base production in the US. With semiconductors holding such strategic significance in the era of AI, there are few companies that the US government would like to onshore its operations as much as Nvidia.

It has already taken steps to do so. It was one of the cornerstone businesses behind Stargate, Trump’s marquee AI initiative announced soon after his inauguration. On 20 March CEO Jensen Huang told the FT that the company was going to invest hundreds of billions of dollars into strengthening its US supply chain over the next four years.

However, the chances of Nvidia relocating its entire operation into the US in quick time are slim, especially given its reliance on TSMC.

TSMC has itself been making efforts to shift operations from its eponymous homeland to the US, having announced $100 billion of investment into three new production facilities (fabs) in the US, on top of its ongoing Phoenix, Arizona operation.

The Taiwan Semiconductor Manufacturing Company (TSMC) fabrication plant in Phoenix, Arizona, US, on Monday, March 3, 2025

Taiwan Semiconductor Manufacturing Co. plans to invest an additional $100 billion in US plants that will boost its chip output on American soil and support President Donald Trump's goal of increasing domestic manufacturing.

(Image credit: Rebecca Noble/Bloomberg via Getty Images)

Again, though, uprooting an entire production ecosystem isn’t easy.

“Such transitions require significant time and investment,” says Akoner.

In the meantime, tariffs on semiconductor components, like those TSMC produces, could raise Nvidia’s costs.

“These increased costs may lead to higher prices for customers and hit the chipmakers’ profit margins,” says Akoner.

Nvidia shares still reeling from DeepSeek

Earlier in the year, Nvidia’s shares set the record for the largest single-day decline in market value in stock market history, shedding nearly $600 billion following the emergence of DeepSeek.

This AI start-up from China became the highest-rated free application on the US App Store in January, sending shockwaves through the stock market given its significantly lower reported training costs, compared to US alternatives like ChatGPT.

Nvidia’s shares were particularly heavily impacted because its high-performance graphics processing units (GPUs), which had been viewed as critical for the development of high-performance AI models, weren’t used to build DeepSeek.

Instead, the app was built using less advanced Nvidia H800 chips – which were specifically developed to circumvent US export controls on the highest-performing chips.

This presented a problem for Nvidia, because its enormous valuation has been built on the expectation of exponential future growth. This expectation was founded on the assumption that only its chips could power the most advanced AI models, creating almost unlimited demand and giving Nvidia near-total pricing control.

Are Nvidia’s shares good value?

The hefty valuation of Nvidia’s shares has given plenty of investors pause for thought over the last two years, but it has, in fairness, come down substantially from the 100-times trailing earnings that the stock has reached during its run.

Following its recent downturn, Nvidia stock now trades at 37.56 times trailing earnings and 24.36 times projected earnings, according to data from stockanalysis.com (as of US market close on 2 April).

Derren Nathan, head of equity research, Hargreaves Lansdown, thinks Nvidia’s share price decline has been unwarranted, and that the stock is still an appealing prospect.

“We think it’s been caught up in the wider pivot towards more defensive sectors,” he says.

“It’s not just the chips that make Nvidia’s product so appealing: the CUDA software platform that enables users to optimise the hardware is key. AI has the scope to transform practically every industry, and Nvidia is proving to be a key partner in everything from healthcare through to self-driving vehicles.”

However, Nathan acknowledges “concerns about trade restrictions and the scale of future demand for Nvidia’s powerful computer processors” as well as the fact that Nvidia’s ability to scale is dependent on its partners.

As always when considering buying shares, it is important that investors conduct their own thorough research and consider the downside risks.

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Dan McEvoy
Senior Writer

Dan is a financial journalist who, prior to joining MoneyWeek, spent five years writing for OPTO, an investment magazine focused on growth and technology stocks, ETFs and thematic investing.

Before becoming a writer, Dan spent six years working in talent acquisition in the tech sector, including for credit scoring start-up ClearScore where he first developed an interest in personal finance.

Dan studied Social Anthropology and Management at Sidney Sussex College and the Judge Business School, Cambridge University. Outside finance, he also enjoys travel writing, and has edited two published travel books