Nasdaq Bear Market Nvidia Crash!

$NVIDIA(NVDA)$

Nvidia just dropped a bombshell after the market closed—and the fallout is hitting AMD even harder. Let’s unpack what’s going on.

At the time of recording this, Nvidia shares are down between 5.3% and 6.5% in after-hours trading, depending on when you’re watching this. Meanwhile, AMD is down even more—around 6.2%—despite the news being entirely about Nvidia.

So what’s the story?

Earlier today, Nvidia filed an 8-K revealing that the U.S. government has imposed new export restrictions on its H20 chips—a version of the more advanced H200, tailored specifically to comply with previous export rules for China. The H20 was Nvidia’s workaround for selling chips in the Chinese market. Well, that loophole is now closed.

As of April 9, 2025, the U.S. government notified Nvidia that a license will now be required to export H20 chips—or any chip achieving similar memory and interconnect bandwidth—to China, Hong Kong, Macau, and several other countries or entities tied to those regions. Then on April 14, the U.S. clarified that this license requirement will be in effect indefinitely.

In response, Nvidia disclosed that its Q1 FY2026 results (ending April 27, 2025) will include up to $5.5 billion in charges, primarily tied to these H20 products. Here’s the breakdown of what that includes:

1. Inventory charges: H20 chips that are now stuck in the pipeline, which Nvidia can no longer sell to their intended markets.

2. Purchase commitments: Pre-existing agreements with suppliers for chips or components that Nvidia is now obligated to pay for, even though they might not be used or sold.

3. Reserves: Financial provisions set aside to cover possible losses or write-downs related to these chips.

To be very clear:

• This is not a fine. No one is penalizing Nvidia with a $5.5 billion fee.

• Nvidia is not completely banned from selling to China. They can still sell H20s—but only with a government-approved export license.

Despite this being Nvidia-specific news, AMD is suffering more in after-hours trading. That might seem confusing at first, but when you dig a little deeper, it starts to make some sense.

China makes up a larger portion of AMD’s revenue than it does for Nvidia. To put numbers behind that, Nvidia’s revenue from China in FY2025 was around $17.1 billion, or roughly 13% of total revenue. AMD’s China exposure is likely even higher in percentage terms, although the exact figure isn’t broken out in detail.

So what’s the market afraid of? That this is just the beginning—and AMD could be next. If the U.S. government suddenly decides that certain AMD products also require a license to be exported to China, we could see similar inventory issues, charges, or outright revenue hits. That fear alone might be enough to trigger the steep selloff we’re seeing in AMD today—even though, as of right now, no official notice has been made regarding AMD.

Now, let’s talk about the strategic implications.

On the surface, this is another move by the U.S. to slow down China’s progress in AI and supercomputing. But here's the potential irony: this could accelerate China’s pivot to domestic alternatives like Huawei. If Chinese companies can no longer rely on U.S. chipmakers like Nvidia (and potentially AMD), they’re more incentivized than ever to fund and adopt local GPU alternatives—even if it means a temporary drop in performance.

We’ve seen whispers already—Huawei is reportedly working on AI chips that, while not yet at Nvidia’s level, are advancing quickly. If the Chinese government throws serious subsidies behind these efforts, it could fast-track development and allow Chinese-designed chips to gain ground. That opens the door for Chinese data centers to wean off U.S. technology—something that would have long-term consequences for Nvidia, AMD, and the U.S. chip industry in general.

In fact, the intended effect of these export restrictions is to maintain U.S. dominance in AI infrastructure, but in practice, it might do the opposite. Restricting access to cutting-edge chips could light a fire under China’s domestic industry, encouraging innovation and self-reliance.

Now, back to Nvidia—because here’s where it gets even weirder.

Today actually started off on a very positive note for Nvidia. The company announced a $500 billion commitment to build AI supercomputers and infrastructure in the United States. The U.S. government promised fast-tracked permits and full support as part of a broader push into the so-called “Golden Age of America.” So you start the day with what seems like a massive bullish catalyst... and end the day with a $5.5 billion gut punch. Talk about a mood swing.

That kind of contradiction—the government supporting Nvidia domestically while restricting it abroad—makes this situation even more bizarre. Of course, these types of policy decisions are never simple, and there are layers of geopolitical context involved. But for shareholders, it’s just chaos.

Valuation

At the time of my purchase, Nvidia was trading at a forward P/E of just 16.5—one of the lowest levels it’s traded at on this metric since 2022. That alone flagged it as a potential bargain.

Beyond that, I’ve also run my own discounted cash flow (DCF) analysis, which I update regularly for all the stocks I follow. As of right before recording this, my updated intrinsic value for Nvidia came out to around $120 per share, while the market price was closer to $94 per share. That’s roughly a 25% margin of safety, even after applying a 14% weighted average cost of capital (WACC) to Nvidia.

To clarify: When I calculate an intrinsic value of, say, $94 using a 14% WACC, I’m saying that I believe Nvidia will return 14% annually from that valuation base. So, if I calculate an intrinsic value of $119–$120, and the stock is currently trading at $94, then I’m expecting a 14% baseline return, plus some additional upside from convergence toward intrinsic value. Even if that full spread doesn’t close within a year, it suggests a compelling opportunity.

Beyond the valuation metrics, Nvidia’s long-term prospects remain incredibly strong. The company is operating in one of the fastest-growing sectors—AI-optimized data centers—and this segment is expected to expand by multiple trillions of dollars by 2035.

In my view, the tariffs may cause short-term disruption, perhaps delaying some spending plans by a few months or up to a year. But over the longer term, I don’t believe they will fundamentally change the demand outlook for AI infrastructure.

AI helps businesses do more with less—either making employees more productive or reducing costs by automating tasks. That cost-efficiency becomes even more critical when businesses are facing rising import costs from tariffs.

Nvidia’s Positioning

Nvidia is far more than a GPU company. Its full AI stack includes networking, CPUs, and the Grace Blackwell architecture—and that entire solution requires imported components from partners like Taiwan Semiconductor Manufacturing Company (TSMC). So yes, tariffs could raise Nvidia’s cost of goods sold by 30%, 40%, or even 50% in some cases.

But here’s the key: Nvidia’s gross margins are 70%—one of the highest I’ve seen for a company selling physical hardware. That gives them plenty of room to absorb higher costs. TSMC also runs with strong margins, which opens the door for shared tariff burdens—some absorbed by Nvidia, some by suppliers, and the rest passed along to customers.

And let’s not forget: Nvidia is nearly sold out of its latest-gen chips for the rest of this year. That’s evidence of real pricing power. Even if some customers push back on price increases, Nvidia can afford that tradeoff due to limited supply and overwhelming demand.

With close to 90% market share in the AI GPU space and no real competition on the same level, Nvidia has a dominant position. They’re in a strong place to negotiate, raise prices, and maintain profitability despite the tariff headwinds.

Risks

That said, this doesn’t mean there aren’t risks. If anything, risks are now elevated compared to where they were before the tariffs were announced. We’re dealing with a mix of geopolitical uncertainty, rising input costs, and export restrictions—all of which could affect short-term results.

Still, when I zoom out and look at Nvidia’s positioning in AI, its market leadership, pricing power, and strong fundamentals, I believe the current setup offers a compelling long-term opportunity, especially at this valuation.

One of the major risks now facing Nvidia is that its largest customers—Alphabet, Amazon, and Microsoft—could potentially reduce their spending. A major disruption, like the one caused by the recent tariffs, is exactly the kind of event that could trigger a cutback in their investment.

So yes, the risks around Nvidia have definitely increased. But that’s something I had already anticipated. I’ve always understood that Nvidia carried significant risks; it’s just that earlier, those risks weren't fully priced into the stock due to all the enthusiasm around AI growth and Nvidia’s dominant position.

However, over the course of this year, more and more of those risks have been priced in, especially following major developments like the DeepSeek announcement. And since then, we’ve had additional moments and data points that have pulled Nvidia's stock down further. As of now, in 2025, the stock has declined meaningfully.

In my opinion, a good amount of the risk is now reflected in the current stock price. Of course, the stock could fall further—and if it does, I'm okay with that. If the fundamentals remain stable and there’s no major escalation—such as a full-scale trade war triggered by retaliations from other countries—then I may even add to my Nvidia position at these lower prices.

However, if the situation does escalate significantly and trade tensions spiral further, I’ll reassess my approach.

Direct vs. Indirect Risks

When it comes to direct impacts, Nvidia is relatively well-positioned. The company has the scale, competitive advantages, and strong margins to handle higher costs of goods sold. It’s worth mentioning that semiconductors were technically excluded from the initial tariff announcement. However, I’m not fully discounting the possibility that this could change—new announcements could easily add semiconductors to the tariff list at any time.

I’m accepting that risk as part of my investment thesis.

The bigger risk, in my view, is the indirect impact—namely, if Nvidia’s major customers like Amazon, Microsoft, and Alphabet start seeing declines in their own business and then decide to scale back their purchases of Nvidia’s AI technology. That would hurt Nvidia far more than just the increase in its own input costs.

Conclusion

Well, if you’re holding AMD, it probably feels like you’re sitting on an "Advanced Money Destroyer" right now. And if AMD drops its own 8-K in the coming days with similar restrictions? Things could get worse before they get better.

That said, it’s important to remember: Nvidia still has massive demand globally, and if licenses eventually come through—or if the company finds alternative markets for those H20 chips—some of this $5.5 billion charge could be reversed or softened in future quarters. And let's face it: Nvidia isn’t exactly struggling to find buyers for its AI hardware.

Still, this moment is a big one. It’s a flashpoint for the ongoing tech cold war, and depending on how both companies—and both countries—respond, it could shape the future of global AI infrastructure in a very different way than intended.

So, yeah. Buckle up.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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