By Nvidia shares declined in early trading Tuesday as geopolitical tensions intensified. The stock fell 1.5% to $174.95.
The broader market also weakened. The S&P 500 dropped 0.9%, while Dow Jones Industrial Average futures slipped 0.8%. The VanEck Semiconductor ETF fell 0.9%.
Markets came under pressure as Donald Trump’s deadline for Iran to reopen the Strait of Hormuz approached, with expectations of a deal fading.
Trump set an 8 pm ET deadline for a resolution, warning of severe consequences if no agreement is reached.
In a Truth Social post, he said: “A whole civilization will die tonight, never to be brought back again. I don’t want that to happen, but it probably will.”
Valuation pressure and market uncertainty
Despite strong earnings, Nvidia’s stock has been volatile.
Its price-to-earnings ratio recently dropped to a multiyear low, reflecting investor caution.
The decline highlights broader uncertainty. Investors are reassessing how geopolitical risks could affect corporate spending and project timelines.
Analysts have raised concerns that an expanding conflict could delay large-scale data centre projects and increase security-related costs, potentially weighing on margins.
Supply chain risks in focus
Attention is also turning to supply chains. While semiconductor companies have not yet reported direct disruptions, risks linked to energy supply are becoming more prominent.
A significant share of Asia’s energy imports passes through the Strait of Hormuz, which remains effectively blocked.
Taiwan Semiconductor Manufacturing Company, a key supplier to Nvidia, is seen as particularly exposed.
The company accounts for about 9% of Taiwan’s electricity usage, with natural gas as the primary energy source.
Taiwanese authorities have said liquefied natural gas reserves should last through May, but the situation remains a concern for investors tracking the semiconductor supply chain.
Nvidia stock remains under pressure
Nvidia shares have fallen nearly 20% from their record high in October, reflecting a broader global selloff.
The decline has been driven in part by geopolitical tensions involving the US, Israel, and Iran.
Elevated oil prices have raised concerns about inflation and the possibility of tighter monetary policy, which tends to weigh on high-growth technology stocks.
The stock now trades at around 20 times forward earnings, one of its lowest valuation levels in recent years.
Investors use P/E multiples to gauge a stock’s valuation relative to its anticipated future earnings.
With the growth of online investment apps, tracking such metrics has become much easier and more accessible to market participants.
Investors are also reassessing returns on heavy AI-related capital spending.
Major customers such as Microsoft, Alphabet, and Amazon continue to invest aggressively, but there are concerns that monetisation could take longer than expected.
Wall Street turns constructive on tech
Despite near-term pressures, Wall Street is becoming more positive on the technology sector.
Goldman Sachs and Wells Fargo said the recent pullback has created a potential entry point for investors.
Wells Fargo upgraded the S&P 500 technology sector to favourable from neutral, citing strong fundamentals and easing valuation pressures.
The bank said concerns around AI adoption appear overdone, with earnings growth still running at a double-digit pace.
“Corporate AI technology spending appears to have enough momentum to reach $650 billion this year. And questions about AI adoption are reasonable but we do not expect entire industries to disappear, nor for large unemployment,” Wells Fargo said in a note.
Goldman Sachs echoed this view, noting that the sector’s valuation relative to expected growth has fallen below that of the broader market, a rare occurrence.
“These factors have opened up an opportunity in the technology sector where growth rates remain strong, but valuations are now low,” Goldman said.
The more constructive stance comes even as geopolitical risks and uncertainty around AI’s economic impact continue to weigh on investor sentiment.
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