What Happened?
Shares of leading designer of graphics chips Nvidia (NASDAQ: NVDA) fell 5.2% in the morning session after anxiety and uncertainty rattled markets as the major stock indices pulled back in the morning session amid concerns about "reciprocal tariffs" to be announced later in the week. The planned tariffs, scheduled for April 2, 2025 (dubbed Liberation Day), were targeted at all countries where the United States had a trade deficit.
Simply put, if a US trading partner imposed higher tariffs on American goods than the US did on theirs, the "reciprocal tariffs" would apply.
The prospect of heightened trade tensions seemed to have stoked fears of stagflation (slower economic growth and elevated inflation) as the anticipated tariffs will likely raise input costs for businesses.
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What The Market Is Telling Us
Nvidia’s shares are extremely volatile and have had 31 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock dropped 6% on the news that stocks pulled back (Nasdaq -1.5%, S&P 500 -1.2%) amid fresh concerns about trade tariffs. The pullback followed comments from President Trump clarifying the scope of his administration's 25% tariffs on Venezuela. He noted that it would apply to any country that does business with Venezuela. For example, 25% is on top of the already-in-place 20% tariff on China because China imports oil from Venezuela, which could translate to a 45% tariff on some Chinese goods. This announcement could significantly raise the operating costs for affected companies and institutions.
Also, the Financial Times reported that Chinese regulators prevented the country's tech companies from using Nvidia's H20 chip. The chip was designed to meet U.S. trade ban rules, but it seemed Chinese regulators were worried they could breach energy-efficiency rules.
Adding to the worries, there were also reports that the U.S. had added more Chinese companies to its trade blacklist, citing national security concerns. As a result, these companies would now need government approval to purchase American technology. Among those affected were tech firms that depended heavily on advanced chips made by U.S. manufacturers, raising concerns about the US chip makers' ability to maintain strong sales in the Chinese market.
Nvidia is down 23.6% since the beginning of the year, and at $105.65 per share, it is trading 29.3% below its 52-week high of $149.43 from January 2025. Investors who bought $1,000 worth of Nvidia’s shares 5 years ago would now be looking at an investment worth $16,031.
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