Why Is Nvidia Stock Down 11% Over The Past Month?

Nvidia stock (NASDAQ:NVDA) has declined by about 5% over the last week and remains down by close to 11% over the past month.  So what has driven the Nvidia sell-off of late?

China Headwinds for Nvidia

Mixed signals are emerging from China for Nvidia. Per the Financial Times, China’s National Development and Reform Commission has introduced energy-efficiency rules for advanced chips used in data centers. The new rules could effectively disqualify Nvidia’s H20 chip from use by Chinese customers building or expanding data centers. The H20 is Nvidia’s flagship processor for the Chinese market, designed with reduced capabilities to comply with U.S. trade restrictions on advanced chip exports. The chip is less sophisticated compared to the company’s top-of-the-line Blackwell processors available in other countries.

Resellers in the gray market have allegedly been using entities registered outside China to purchase Nvidia’s latest chips, such as the Blackwell GPUs—whose sale is banned to Chinese customers—through companies in Singapore, Malaysia, Taiwan, and Vietnam. Recently, Singapore charged three men in a fraud case linked to the suspected sale of Nvidia chips through Malaysia to China. Under U.S. pressure, Malaysia is now collaborating with the U.S. and Singapore to track the movement of high-end Nvidia chips and tighten semiconductor regulations. This concern is valid, given that Singapore has become Nvidia’s second-largest market, generating about $23 billion in sales in FY’25 (ended January 26), or 18% of total revenue – up sharply from $2.3 billion (about 8% of revenue) in FY’23. In comparison, China officially accounted for 13% of revenue in FY’25. Regulatory scrutiny on these sales could potentially impact Nvidia stock.

Data Center Demand Concerns

There are growing concerns about the sustainability of the AI spending boom. Signs suggest that the massive investments by U.S. tech firms could slow down. In January, Chinese startup DeepSeek unveiled an AI model that operates at a much lower cost than those of most Western companies. This could push firms to reconsider their hardware-intensive approaches and prioritize efficiency. Additionally, AI investments have yielded poor returns so far, raising concerns among investors – especially if the U.S. economy weakens. Inflation is expected to resurface, and economic growth could slow amid new tariffs imposed by President Donald Trump. These concerns appear to be playing out on the ground. Reports this week indicated that Microsoft had scrapped some data center projects in the U.S. and Europe over the past six months due to oversupply relative to its demand forecast. Separately, Alibaba’s Chairman Joe Tsai also recently cautioned about a potential bubble in AI and data center spending.

The increase in NVDA stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 125% in 2021, -50% in 2022, 239% in 2023, and 171% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period.

Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could NVDA face a similar situation as it did in 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?

We value Nvidia stock at about $101 per share, which is about 10% below the market price of $112. See our analysis of Nvidia valuation: Expensive or Cheap. There are a couple of reasons why we are slightly negative on the stock at the moment. We see a possibility that the “fear-of-missing-out” driven AI wave seen over the last two years could ease due to diminishing incremental performance gains from larger models and also as the availability of high-quality training data becomes a bottleneck. This shift toward more efficient models could compound the impact of a potential slowdown for GPU makers such as Nvidia. Moreover, Nvidia could also face mounting competition from the likes of AMD as well as its own customers like Amazon, who have been focusing on developing and deploying their own AI chips. While Nvidia does have a comprehensive software ecosystem around its AI processors, including programming languages that should help it better lock customers into its products, the company could face pressure. Nvidia’s premium valuation may not fully reflect these risks at the moment.

[1] Returns as of 3/28/2025
[2] Cumulative total returns since the end of 2016

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