What Happened?

Shares of leading designer of graphics chips Nvidia (NASDAQ:NVDA) fell 5% in the morning session as stocks grappled with more uncertainty after President Trump criticized the Federal Reserve's approach to interest rate cuts, warning that the pace was slow and could hinder economic growth. Trump's comments added pressure to an already sensitive market, raising concerns about political interference in monetary policy. 

Meanwhile, Fed Chair Jerome Powell maintained a cautious stance the previous week, highlighting the difficulty of balancing the dual mandate of steady employment and price stability amid the escalating trade tension. 

Investor sentiment was further dampened by the absence of constructive progress in trade negotiations, especially US-China relations which took a turn for the worse in the previous week. 

Overall, the outlook seemed more unclear heading into the first quarter 2025 earnings season, as a combination of hard to predict monetary policy and unresolved trade tensions weighed on business confidence.

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What The Market Is Telling Us

Nvidia’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 5 days ago when the stock dropped 7.4% on the news that the company announced it might be unable to sell some high-end chips (including the H20 chips) to China due to export controls and requirements from the Trump administration. Notably, Nvidia received an export restriction notice on April 9, 2025, suggesting the development was unanticipated heading into the quarter and likely not baked into its near-term sales forecast. As a result, the company planned to take a $5.5 billion charge due to inventory writedowns and canceled sales. 

The H20 chips were built for China to fit within limits set during the Biden administration. China brought in more than 10% of Nvidia's sales in fiscal 2025, so the new restrictions could still weigh hard on Nvidia's growth in the near term. 

On a separate note, chip tool maker ASML posted weak bookings (a key demand indicator) which fell below Wall Street's expectations, noting that tariffs had made the industry's outlook more uncertain. 

The semiconductor industry's intricate supply chain means that ASML's performance has cascading effects on companies like Nvidia and AMD. Investors treat ASML's outlook as a proxy for demand in the industry, and if ASML's orders are down, it suggests chip producers are delaying capacity expansion. 

ASML's CEO, Christophe Fouquet, called out "customer cautiousness" and a "more gradual" recovery in areas outside of AI. Such caution among customers can imply reduced demand by fabless chip designers such as Nvidia and AMD, affecting their short-term revenues and stock valuations.

Nvidia is down 30.6% since the beginning of the year, and at $95.95 per share, it is trading 35.8% below its 52-week high of $149.43 from January 2025. Investors who bought $1,000 worth of Nvidia’s shares 5 years ago would now be looking at an investment worth $14,240.

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