NVIDIA Corporation (NASDAQ: NVDA), like Advanced Micro Devices (AMD), is having an overwhelmingly rough start to the trading session this morning. The declines are ultimately the result of news from the Trump Administration that it is working to place tariffs on “Made in China” products. Today, we’ll talk about:
- The news from the Trump Administration;
- why this has anything to do with NVDA;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
The Trump Administration Puts The Brakes On NVDA
As mentioned above, NVIDIA is having a rough start to the trading session this morning after the Trump Administration announced news of a potential tariff that will be coming down the line. Yesterday, the Administration released a massive list of Chinese exports that it intends to target for tariffs. This follows along the lines of Trump’s plans to charge tariffs of up to 25% on Made in China products in the midst of the ongoing trade war.
Ultimately, the move was the result of an announcement made in China that the country would be charging tariffs on goods made in the United States. The tariffs target about $50 billion in US goods ranging from airplanes to whiskey and much more. Nonetheless, the news sparked concerns among investors in various different securities, including NVDA.
What Does This Have To Do With NVIDIA?
At first glance, you may think that this news has little or nothing to do with NVDA. However, that notion couldn’t be further from the truth. After all, the company sells products that are largely made in China. Therefore, if these tariffs do go into effect, the cost to produce products will immediately climb for NVDA by the percentage of the tariffs. Of course, the company isn’t likely to foot the bill, so it will be sent down to the end users.
The big concern here is that, due to the tariffs, NVIDIA will be forced to increase its prices as much as 10% or more, depending on the size of the tariff. If this is indeed the case, profits could take a massive hit. Think about it – when prices go up, demand tends to fall. If NVDA can’t hold demand where it is or near where it is, the cost to produce each unit may climb further, eating into profits. At the end of the day, the tariffs are not good news for the company!
What We’re Seeing From The Stock
Any time bad news plagues a publicly traded company, we tend to see the result of the bad news reflected in the price action surrounding the stock. That’s absolutely the case with NVIDIA today, as one would expect. With concerns that tariffs may cause the company’s bottom line to see some declines, we’re seeing declines in the value of the stock. Of course, our partners at Trade Ideas were the first to alert us to the movement. Currently (8:58), NVDA is trading at $217.55 per share after a loss of $7.80 per share (3.46%) thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on NVDA. In particular, we’re interested in following the story surrounding the tariffs and how the move from the Trump Administration will be portrayed in the performance of the company in coming quarters. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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