Nvidia's stock falls as these two questions dog investors

MW Nvidia's stock falls as these two questions dog investors

By Emily Bary

Wall Street is trying to assess how tariffs would impact the chip sector. Plus, the DeepSeek fallout lingers.

Nvidia Corp.'s stock is declining in Monday action as investors weigh the potential for tariffs to impact chip companies and continue to assess the fallout from DeepSeek.

Shares of Nvidia $(NVDA)$ are down 3.4% in midday action to rank among the worst performers in the PHLX Semiconductor Index SOX. The stock has pared losses with President Trump now saying he has agreed to pause the Mexico tariffs for a month.

Still, investors are wondering how tariffs will play out in the semiconductor sector. It's complicated, analysts say.

Read: Here are all the ways Trump's tariffs could hit stocks, according to Goldman Sachs

While the U.S. imported about $73 billion worth of semiconductors in 2023, only a sliver of that value - roughly $7 billion - came from China, Mexico or Canada, according to Bernstein's Stacy Rasgon.

That means companies shouldn't feel too many "direct" impacts from the tariffs set to go into effect Tuesday, but there could still be indirect impacts as many other major import categories are electronics that contain semiconductors.

"In fact, the three largest categories of imports from global locations to the US are electrical equipment, machinery, and vehicles, all of which are likely to contain large amounts of semiconductors," Rasgon wrote. Those "end-device" categories have more links to China, Mexico and Canada, he noted.

In Nvidia's case, he flagged a Reuters report from last year showing that Foxconn was aiming to build a huge Mexico factory that would bundle Nvidia GB200 chips. Overall, Rasgon noted that the U.S. imports $39 billion of data-processing equipment like servers and computers from China as well as $28 billion from Mexico.

"Hence the prospect for indirect effects seems high (though of course not just for semiconductors)," Rasgon wrote, flagging that the import values for electrical equipment and machinery and vehicles are even larger.

Wedbush analyst Daniel Ives said he thought these introductory tariffs seemed more like "scare tactics" and advised investors to consider buying affected names on their pullbacks.

"We believe short-term supply-chain disruptions for the chip ecosystem will be very limited during this period as it relates to Nvidia, AMD, TSMC and others with retaliatory measures from Beijing as limited in the near-term," Ives wrote.

Meanwhile, Nvidia's stock is still tied up in the continued discussion about DeepSeek's artificial-intelligence advancements and their potential to impact chip spending. Melius Research's Ben Reitzes had a nuanced view as he took stock of the situation early Monday.

"To be clear, we [do] believe that cheaper models and the techniques that DeepSeek demonstrated will actually have the effect of increasing the adoption of AI - eventually," he wrote in a note to clients.

But things are still complicated for Nvidia shares "as we see prospects for further volatility as we try to figure out if we take a step back in spending, before we take giant leaps forward," Reitzes added.

See more: Does DeepSeek spell doomsday for Nvidia and other AI stocks? Here's what to know.

-Emily Bary

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February 03, 2025 12:51 ET (17:51 GMT)

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