NVIDIA's stock price approaches the valuation low point of the AI era, with multiple risks becoming a "roadblock" for bottom-fishing

According to Zhitong Finance APP, although NVIDIA (NVDA.US) stock price has fallen to the lowest valuation range in the AI development cycle, the subsequent risk events have made investors hesitant about the "buying on dips" strategy. The global AI chip leader is caught in a vortex of geopolitical and industrial cycle overlaps.

Last week, the U.S. Department of Commerce imposed a ban on the sale of H20 chips to China, directly tearing open a market gap worth billions of dollars. This product line was originally aimed at China's AI computing power demand, but has now become a sword of Damocles hanging over its financial reports. Even more unsettling for the market is that this move has intensified concerns that the AI investment cycle may peak earlier than expected, especially in the context of a trade war escalating and casting a shadow over overall economic growth prospects.

Numerically, NVIDIA's price-to-earnings ratio of 22 times is significantly discounted compared to its long-term average, and its 24% decline this year is twice that of the Nasdaq 100 index. However, Krishna Chintalapalli, head of technology at Parnassus Investments, warns: "Current valuations may seem reasonable, but they hide complexities."

He emphasizes that to accurately predict stock price movements, one must bet on multiple variables such as tariff trends, Chinese technology policies, and the investment pace of large tech companies, and "the combination of these factors is creating unprecedented uncertainty."

Given that NVIDIA's growth rate is expected to far exceed the overall market level, the company's revenue is projected to grow by 57% this year, while the S&P 500 index's revenue growth rate is expected to be only 4.7% during the same period. However, its stock price has recently shown weakness, a phenomenon that warrants investor attention.

Nonetheless, NVIDIA's growth is largely attributed to so-called "hyperscale enterprises"—including Microsoft (MSFT.US), Google (GOOGL.US), Amazon (AMZN.US), and Meta Platforms Inc. (META.US)—all of which are important customers of NVIDIA and have invested hundreds of billions of dollars in building AI infrastructure.

Although these tech giants have spent hundreds of billions on AI infrastructure, "their profit margins could collapse at any time due to intensified competition," Chintalapalli points out, "and more challenging is that, with tariffs looming, you have no control over their investment pace."

Ironically, the cloud of tariffs has made NVIDIA appear relatively safe among its chip peers. Bloomberg Industry Research indicates that NVIDIA, which focuses on AI accelerators, is least affected by tariff impacts, while its peers targeting consumer electronics and automotive sectors will face indirect blows on the demand side However, ASML's (ASML.US) earnings warning has dampened the market: even the leader in chip equipment admits that "the impact of tariffs on the global supply chain is difficult to quantify." Additionally, TSMC (TSM.US) has confirmed its outlook, suggesting that demand for AI-related chips remains strong, although analysts point out that tariff issues remain a key uncertainty factor.

Daniel Flax, an analyst at RBC Capital Markets, stated, "Political factors will continue to be an important component of the investment landscape for the foreseeable future, and the landscape will continue to evolve. This will impact many companies, including NVIDIA, but I believe NVIDIA will continue to execute and innovate, driving growth. Looking at a 12 to 18-month time frame, I think NVIDIA's stock price looks quite attractive."

In the long term, analysts generally maintain an optimistic outlook. According to data tracked by Bloomberg, nearly 90% of analysts recommend buying NVIDIA stock. Furthermore, although NVIDIA's stock price is currently more than 60% below the average target price set by analysts, its implied return has reached a relatively high level compared to the past few years. Investors who remain bullish on NVIDIA in the long term view the recent weakness in stock price as a good buying opportunity.

In the short term, "this news has eliminated a major uncertainty, making H20 chip-related stocks more attractive now than before," said Ivana Delevska, Chief Investment Officer at SPEAR Invest, after NVIDIA's stock initially dropped due to news of the H20 chip ban. She added that in the long run, NVIDIA's inability to enter the Chinese market will undoubtedly be a negative factor.

Shana Sissel agrees with this view, believing that the current valuation marks an excellent buying opportunity, especially ahead of NVIDIA's earnings report at the end of May, which she expects will show signs of Chinese consumers purchasing in advance in anticipation of tariffs. "I think NVIDIA stock is very attractive right now, and I have always been optimistic about it and will continue to be in the future," she said.

Overall, the tug-of-war surrounding NVIDIA is essentially a stress test of the resilience of the AI industry. As the technological revolution encounters geopolitical games, the market is waiting for that key variable that could break the balance—perhaps the speed of breakthroughs in Chinese AI chips, or perhaps the next swing of the tariff stick from the White House