Nvidia’s stock has fallen due to export controls, making it an excellent buying opportunity

Analysis of Nvidia Stock Decline: Export Control Impact and Market Reaction

1. Event-Driven Factor: Short-Term Headwinds from U.S. Export Control Escalation

• Direct Impact: In April 2025, the U.S. government announced “indefinite export controls” on Nvidia’s H20 AI chips and related products, aimed at preventing their use in Chinese supercomputers. This forced Nvidia to write down $5.5 billion in inventory, purchase commitments, and related reserves.
• Spillover Effects: AMD incurred approximately $800 million in losses due to similar restrictions. Supply chain companies like TSMC and Advantest saw synchronized stock declines. Following the news, Nvidia’s after-hours shares fell 6.3%, while AMD dropped 7.1%.

2. H20 Chip Competitiveness and Market Positioning

• Performance Limitations: The H20, designed as a compliant chip for the Chinese market, underperforms the H100 and A100, lacking NVLink support and facing bandwidth constraints. Analysts argue it is only viable for inference tasks, not training scenarios.
• Market Rationale: Despite H20 sales restrictions, the chip is not a core product for Nvidia. Key revenue drivers remain unaffected, including the unrestricted H100/H200 and next-gen Blackwell architecture products.

Why This Could Be a Buying Opportunity?

1. Strong Fundamentals: Financial Resilience and Growth Momentum Intact

• Financial Performance: For FY2025, Nvidia’s annual revenue surged 114% YoY to $130.5 billion, with net profit up 145% to $72.88 billion and gross margins at 75%. The data center business drove growth, with quarterly revenue rising 78%.
• Cash Flow Strength: Operating cash flow reached $64.09 billion in 2025, with free cash flow at $60.85 billion, fueling R&D and shareholder returns.

2. Long-Term Growth Drivers: AI, Data Centers, and Emerging Markets

• AI Infrastructure Demand: Global cloud giants (Microsoft, Google, Amazon) continue ramping up AI investments, with 2024 capex projected at $161 billion. Nvidia’s Blackwell chips, offering 25x performance gains over predecessors, have orders backlogged into 2025.
• Diversified Growth: Autonomous driving (DRIVE platform), metaverse (Omniverse), and enterprise AI solutions unlock new opportunities in a $1.7 trillion addressable market.

3. Technical and Valuation Metrics: Short-Term Overshooting vs. Long-Term Value

• Key Support Levels: Technical analysis suggests buying opportunities at $96(2024low)and$76 (historical strong support).
• Valuation Upside: Current P/E ratio of 37x is below the 5-year average of 47x; price-to-sales ratio of 21x aligns with historical norms. Excluding China-related revenue (~12%), core business valuation appears more attractive.

4. Mitigating Policy Risks and Strategic Adjustments

• Supply Chain Reshoring: Nvidia announced its first U.S.-based AI supercomputer production line, reducing geopolitical reliance.
• Limited Chinese Alternatives: Huawei’s CloudMatrix 384 outperforms Nvidia’s NVL72 in raw compute but faces high energy costs and TSMC dependency. Chinese clients may turn to “gray markets” for high-end chips.

Risk Factors and Mitigation Strategies

1. Short-Term Risks

• Policy Uncertainty: Potential expansion of U.S. controls to gaming GPUs.
• Inventory Overhang: The $5.5 billion write-down could pressure margins over the next 2-3 quarters.

2. Long-Term Competitive Landscape

• CUDA Ecosystem Moat: Forced adoption of Chinese chips may erode Nvidia’s software edge. Monitor compatibility progress with frameworks like PyTorch.
• Rival Threats: AMD’s MI300 series and Amazon’s Trainium chips pose cost-performance challenges.

3. Investment Strategy Recommendations

• Phased Accumulation: Build positions near technical support levels (e.g., below $100) to manage short-term volatility.
• Catalyst Watch: Track Blackwell chip mass production, enterprise AI orders, and potential U.S. policy easing.

Conclusion: Short-Term Pain vs. AI Leadership Unshaken

Nvidia’s stock decline reflects policy-driven panic, not deteriorating fundamentals. Its core strengths—hardware superiority, CUDA ecosystem, and client stickiness—remain intact, with global AI infrastructure spending still in its early innings. For long-term investors, this pullback offers a chance to own a cornerstone AI asset at a reasonable valuation. While policy risks and supply chain adjustments warrant monitoring, the long-term growth thesis stands firm.