TLDR:

• Nvidia stock rose 1.2% in premarket trading Friday after falling 5.9% on Thursday
• The stock is down 26% from its all-time high, now trading at its lowest P/E ratio since 2023
• Amazon and Google are developing their own AI chips while remaining Nvidia customers
• Trump imposed 145% tariffs on China, with China responding with 125% levies on US goods
• Analysts remain bullish despite cutting price targets, citing Nvidia’s technology leadership

Nvidia’s stock has been on a rollercoaster ride this week as investors react to tariff announcements and competitive pressures. The chip giant saw its shares climb 1.2% in premarket trading Friday, following a 5.9% drop during Thursday’s session.

The stock has been primarily driven by broader market sentiment around tariffs. It surged 19% on Wednesday after President Trump announced a 90-day delay on most reciprocal tariffs.

However, the gains were short-lived as the market absorbed the reality of escalating U.S.-China trade tensions. The White House confirmed that total tariffs imposed on China in Trump’s second term now amount to 145%.

This creates potential risk for American companies like Nvidia, though the chip maker hasn’t been specifically targeted yet. China announced Friday it would increase levies on U.S.-made goods to 125% but wouldn’t match any further increases.

Citi analyst Atif Malik has responded by cutting estimates of Nvidia’s GPU sales by 3% for this year and 2026. He reduced his target price on the stock from $163 to $150 but maintained a Buy rating.

The AI Arms Race Continues

Despite the tariff drama, many analysts believe Nvidia remains well-positioned in the AI chip market. The company’s GPUs are the preferred hardware for training artificial intelligence models.

During Nvidia’s 2025 GTC event, CEO Jensen Huang stated that data center capital expenditures are expected to reach $1 trillion by 2028. That’s a massive increase from 2024’s $400 billion.

With Nvidia’s trailing-12-month revenue totaling $130 billion, the company clearly captures a significant portion of that market. Some leading AI firms have noted that each new iteration of their generative AI models requires increasingly more computing power.

This trend favors Nvidia’s future growth prospects. The importance of winning the AI arms race cannot be understated, as having strong AI capabilities will be crucial for companies to remain competitive in the coming years.

Competition Heats Up

Some of Nvidia’s biggest customers are signaling they’ll try to reduce their dependence on the chip maker. Amazon CEO Andy Jassy wrote in a shareholder letter Thursday: “AI does not have to be as expensive as it is today, and it won’t be in the future. Chips are the biggest culprit. Most AI to date has been built on one chip provider.”

Amazon is developing its own alternative to Nvidia’s chips with a family of custom silicon called Amazon Trainium. However, it continues to be a major customer for Nvidia hardware.

Similarly, Google announced its seventh-generation tensor processing unit, called Ironwood, will be available to cloud customers in late 2025. The chip is designed for inference—the process of producing answers from AI models—and is reportedly more than 10 times more powerful than its predecessor.

There has been speculation about whether Nvidia’s dominant position in AI chips would weaken as the focus shifts from training AI models to inference. The company has pushed back against this notion.

Nvidia points out that inference already makes up around 40% of its data-center revenue and is growing rapidly. Its NVL72 server system delivers a fourfold improvement in AI model training and up to 30 times improvement in inference compared with previous systems.

Interestingly, Google also announced that its cloud business will be among the first to offer Nvidia’s upcoming Vera Rubin AI chips, showing that even as these tech giants develop their own chips, they’re still partnering with Nvidia.

Attractive Valuation

From a valuation perspective, Nvidia’s stock is starting to look appealing to some investors. After the recent market sell-off, Nvidia has reached price levels not seen in some time.

The stock is currently trading at its lowest price-to-earnings ratio since 2023 and the lowest forward P/E since early 2024. This comes at a time when Wall Street analysts expect Nvidia’s revenue to increase by 56% this year and 23% next year.

Compared to the S&P 500 index, which trades at a forward P/E of 20, Nvidia’s stock isn’t priced much higher than the market despite its much stronger growth prospects.

For long-term investors who can look past short-term economic concerns, Nvidia may represent an opportunity. While the stock is down 26% from its all-time high, the company’s fundamental business drivers remain strong.

Other chip makers are also showing signs of recovery. Advanced Micro Devices rose 1.4% and Broadcom gained 1.1% in premarket trading Friday.

China’s statement that it wouldn’t match any further U.S. tariff increases, saying American imports are no longer marketable under current levels, may provide some relief to tech stocks exposed to the Chinese market.