Nvidia Stock Tumbles Again Before Critical Earnings Report Wednesday

TLDR

• Nvidia shares dropped 2.4% in premarket trading Friday after falling 3.6% Thursday, extending the tech sector sell-off
• Wall Street analysts expect strong third-quarter results and higher fourth-quarter guidance driven by Blackwell Ultra hardware shipments
• Nvidia opposes proposed legislation requiring chip firms to prioritize US demand over exports to China and embargoed countries
• The company may be resuming shipments to China as it raises production of older Hopper chips
• Nvidia stock has historically dropped over 30% within two months on eight separate occasions despite its AI dominance

Nvidia shares fell 2.4% to $182.39 in premarket trading Friday. The drop extends Thursday’s 3.6% decline as investors continue fleeing technology stocks.

NVIDIA Corporation, NVDA

The move aligned with other AI-focused chip stocks. Advanced Micro Devices dropped 2.5% while Broadcom lost 1.2% in premarket trading.

The drops are putting pressure on Nvidia to deliver strong results with its earnings report on Wednesday. Wall Street analysts remain generally positive on the company’s prospects.

KeyBanc analyst John Vinh expects Nvidia to report strong third-quarter results and guide fourth-quarter higher. He maintained an Overweight rating and $250 target price on the shares.

Vinh said increasing shipments of Nvidia’s Blackwell Ultra hardware would drive growth. He noted the company was raising production of its older Hopper chips.

The increased Hopper production could mean Nvidia is resuming shipments to China. Nvidia declined to comment on whether it plans to resume China shipments.

The company has previously said it is assuming no Chinese revenue. Beijing discourages domestic companies from using US hardware.

Export Legislation Creates New Pressure

Debate continues about exports of advanced AI chips. Microsoft and Amazon are both supporting proposed legislation that would require chip firms to satisfy US demand before sending products to China and other embargoed countries.

Nvidia opposes this policy. The Wall Street Journal reported the company’s opposition to the proposed requirements.

An Nvidia spokesperson provided a statement to Barron’s Friday. The company said it doesn’t sell restricted products to adversaries at the expense of American companies.

Nvidia said the proposed policy would overturn President Donald Trump’s AI Action Plan. The company claims it would surrender America’s chance to lead in AI and computing worldwide.

Nvidia faces multiple challenges despite its AI market dominance. US export restrictions and rising domestic competition from companies like Huawei are expected to decrease Nvidia’s AI chip market share in China.

Major cloud providers including Google, Amazon, and Meta are increasingly creating their own custom AI chips. Google’s Ironwood TPUs aim to lower dependence on Nvidia and optimize for particular workloads.

AMD’s Instinct MI300X series and Intel’s Gaudi 3 are gaining traction in AI accelerators. AMD recently said it expects revenue growth to average over 35% over the next three to five years.

Nvidia’s stock has dropped over 30% within less than two months on eight occasions in various years. The stock experienced an 85% decline during the Global Financial Crisis and 68% during the dot-com crash.

Despite the risks, Nvidia reported 71.6% revenue growth over the last twelve months. The company maintains a 43.6% free cash flow margin and 58.1% operating margin.

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