After the wild market moves during February and March, investors are understandably reeling from losses in several major stocks.
One of the companies that is now trading far below its 52-week high is chip giant NVIDIA and the big question looming now is whether it will recover or slide further?
How Far Must NVIDIA Leap To Regain Former Highs?
NVIDIA’s 52-week high was $153.13 so the share price needs to soar by about 38.2% to reclaim that high point.
For such a large jump to occur quickly, the market would likely need to see improvements in the much more negative outlook for the economy the recent tariff announcements have caused.
Over a longer period of time, though, NVIDIA certainly has the potential to reclaim former glories and hit that level and go beyond but short term will be a real challenge.
Is NVIDIA Exposed to Tariffs?
Although NVIDIA suffering from recent volatility alongside the rest of the market during last week’s tariff turmoil, it is somewhat more insulated from protectionist trade policy than many other large businesses.
To begin with, even under the original reciprocal tariff plan, semiconductors from Taiwan were given a special, albeit temporary, exemption from the 32% levy on goods coming from the island. Though this left concerns about other parts in place, it spared NVIDIA and other chip companies from the worst initial effects of the tariff plan.
Another very recent and unexpected development is also set to support NVIDIA. In mid-April, the Trump administration announced that it planned to exempt a range of both finished electronics and electronic components from the 125% tariff it has placed on Chinese imports.
While details are still emerging as of the time of this writing, the decision to exempt electronic components could be extremely beneficial for NVIDIA. With both its semiconductor imports and now other electronic parts free from surging tariffs, NVIDIA could be in a much better position than the market originally thought. Of course no sooner had the news been announced then Lutnick chimed in to counter the narrative, further cementing doubt in investors’ minds.
Regardless, NVIDIA certainly isn’t immune to the broader effects of the tariff policy. A slowdown in tech investment capex in particular is expected to reduce investment in AI data centers, potentially weakening demand for NVIDIA’s new chips.
Although it didn’t directly tie the decision to the new tariff policy, Microsoft announced on Friday that it planned to slow investment in new data centers. Though NVIDIA remains the undisputed dominant force in its industry, a curtail in spending from large tech companies like Microsoft could certainly still hurt it.
NVIDIA Is Still Trading at a Premium Valuation
Even after coming off of its recent highs by such a large amount, NVIDIA is still trading at a premium that reflects its role at the heart of a fast-growing industry. NVDA shares trade at 21.1x sales and 37.8x earnings, both of which are quite high for the vast majority of businesses.
Bearing in mind that analyst price forecasts largely haven’t caught up with the risks presented by tariffs, the average target price for NVIDIA is $167.78. This is a 51.3% jump from the current target price, but not particularly far above the 52-week high point.
Considering NVIDIA hadn’t even reached this target before tariff fears started pummeling both its share prices and the overall economic outlook, it’s quite likely that an appropriate target at this point would be significantly lower.
Will NVIDIA Climb Beyond Formers Highs?
Given NVIDIA’s quality as a business and its sheer competitive moat, there’s little reason to believe that the company won’t mushroom earnings over the long run, and indeed they are slated to grow by 35% annually over the next 5 years.
Last year Jensen and his team reported a revenues climb of 114% to $130.5 billion as well as a bottom line mushrooming of 145%. These growth rates were nothing short of astonishing, especially for a business already as big as NVIDIA.
While uncertainty spreading fast some cold water on NVIDIA’s growth is reasonable to expect but equally it seems very unlikely that it will stop it altogether. NVIDIA still accounts for around 80 to 85% of the AI chip market, and data centers will continue to be built even if investment in them slows down somewhat.
So, Will NVIDIA Regain Its 52-Week High?
Between the fact that NVIDIA has been protected from extremely high tariffs more than most other businesses and its potential for strong forward growth alongside the continuing development of AI, the question seems to be more when than if NVIDIA can make it back to its trailing 52-week high.
If tariffs remain in place and data center investment slows, it could take some time for NVDA shares to cross the $150 mark again through ongoing growth. A permanent cessation of tariff policies, meanwhile, would probably send both NVDA shares and the market at large upward at a much faster pace.
In a very negative scenario where NVIDIA’s growth is badly cut, it could take multiple years for the stock to get back up to where it once was. To some degree, it’s likely that demand for automation could increase if the tariffs remain in place if companies start to reshore manufacturing under an extended tariff program. This could actually increase AI demand in the long run, though it would likely be a slow process.
Trade policy is now key and if the 90-day tariff pause expires without new trade agreements in place, for instance, both NVDA and the market as a whole would almost certainly move lower again.
Likewise, a reversal of the decision to exempt semiconductors and electronic components could hit AI stocks like NVIDIA particularly hard.
With that said, NVIDIA’s characteristics as a business suggest that it still probably has ample long-term growth potential. As such, the stock will likely continue to advance in the long run, even if it doesn’t immediately jump back up.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
