How can Nvidia turn the tables under the triple whammy?
On March 26, 2025, the NASDAQ Composite Index fell 2.04% in a single day, while NVIDIA saw its stock price plummet by 5.74%, wiping out 1.2 trillion yuan in market value in one day. After-hours and night trading continued the decline, with the stock down 1.5% from the previous closing price at the time of writing. This sudden market turbulence is not an isolated incident but the result of a triple whammy of tariff policies, technical compliance issues, and industry supply-demand imbalances.
I. The Triple Whammy: Black Swan or Gray Rhino?
1. Trump Tariffs: A Double Blow to Supply Chains and Confidence
The Trump administration announced a permanent 25% tariff on imported automobiles and parts. Although not directly targeting the chip industry, it triggered a chain reaction: On one hand, NVIDIA relies on advanced manufacturing processes from TSMC (Taiwan, China) and Samsung (South Korea). If the U.S. expands tariff coverage, localized production would drive up manufacturing costs and erode profit margins. On the other hand, the tariffs heightened market concerns about escalating global trade wars and economic recession, leading to a collective plunge in U.S. tech stocks, with NVIDIA, as a high-valuation target, bearing the brunt.
2. H20 Chip Compliance: Energy Efficiency Shortcomings Meet Domestic Alternatives
NVIDIA's H20 chip, specifically designed for China, bypasses U.S. computing power restrictions but fails to meet China's National Development and Reform Commission (NDRC) new energy efficiency standards. The NDRC requires new data centers to use high-efficiency chips, but the H20, constrained by U.S. "performance density" limits, has its floating-point computing power cut to 1/7 of the H100, with energy consumption per unit of computing power exceeding thresholds. Although companies like Tencent and Alibaba temporarily circumvent the restrictions by deploying the chips in older data centers, domestic alternatives like Huawei's Ascend and Cambricon can now match the performance of two A100 chips with one unit, forcing NVIDIA to redesign. If further energy efficiency optimizations degrade the H20's performance, its competitiveness in the Chinese market will suffer significantly.
3. Microsoft Order Cuts: A Warning Sign of Computing Power Oversupply
Microsoft announced a pause on the construction of 2-gigawatt data centers in Europe and the U.S., directly sparking fears of an "AI computing power bubble." Companies like OpenAI are shifting from a "training arms race" to "inference efficiency optimization," leading to a temporary saturation in demand for high-end GPUs, with Amazon and Meta also cutting orders. NVIDIA's data center business growth slowed from 262% to 78%, while channel inventory turnover days lengthened, and delays in Blackwell chip mass production further exacerbated supply imbalances. A Silicon Valley fund manager bluntly stated, "When even Microsoft hits the brakes, who dares to bet on infinite computing power growth?"
II. Fundamental Resilience: Is NVIDIA's "Moat" Shaking?
Despite short-term headwinds, NVIDIA's fundamentals still have three key supports:
1. Technological Barriers and Ecosystem Stickiness
Over 90% of global AI developers rely on NVIDIA's CUDA framework, creating a "hardware + software" synergy that competitors cannot easily break. The next-generation Blackwell chip offers a 40% performance boost over the H100 and has already secured orders from Google and Microsoft. NVIDIA's computing segment revenue for fiscal 2025 is projected to reach $22.6 billion, up 162% year-over-year. Jensen Huang emphasized at the GTC conference, "Inference computing power demand will grow a hundredfold—the AI era has just begun."
2. Diversification Opens New Opportunities
NVIDIA is transitioning from "selling shovels" to "empowering ecosystems": launching the DGX Cloud platform for on-demand computing power leasing; its DRIVE platform covers 70% of global automakers, with humanoid robot chip R&D accelerating. Additionally, the company plans to spend $500 billion over the next four years procuring U.S.-made chips, aligning with "America First" policies while accelerating TSMC's Arizona factory production to ease supply chain pressures.
3. Valuation Returns to Reasonable Levels
NVIDIA's P/E ratio has dropped from a peak of 75x to 38x. While still above the industry average, its profit growth far outpaces peers, and its forward P/E (30x for 2026) is attractive among tech giants.
Conclusion: When the Bubble Bursts, the Real Gold Emerges
NVIDIA's plunge reflects the AI industry's shift from "irrational exuberance" to "rational development." In the short term, tariffs, compliance issues, and computing power oversupply will weigh on the stock. Long-term, however, technological barriers, ecosystem stickiness, and new scenario expansions remain its core strengths. If NVIDIA can break through in supply chain localization, energy efficiency optimization, and software-as-a-service, it may regain momentum after the correction. After all, the endgame of the AI revolution is not the bursting of a "computing power bubble" but the triumph of hardcore technology.
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