NVIDIA (NVDA) has experienced a sharp decline recently, dropping about 25.5% from its 52-week high as concerns over tariffs, regulatory risks, and AI competition weigh on the stock. This pullback has been particularly painful for long-term investors, including myself, as I hold LEAPS (Long-Term Equity Anticipation Securities) on NVDA. While my initial thesis on NVDA’s long-term AI dominance remains intact, the short-term volatility has tested my conviction. The stock’s drop, despite a stellar Q4 earnings report showing 78% YoY revenue growth, highlights how broader macroeconomic and geopolitical risks can overshadow even strong fundamentals.
The decline seems to be driven by multiple factors beyond just profit-taking. New tariffs and regulatory concerns, particularly surrounding U.S.-China relations and chip restrictions, have created additional uncertainty. Reports that Chinese firms may be circumventing U.S. export bans by acquiring NVIDIA’s Blackwell chips through intermediaries have further complicated the regulatory landscape. Additionally, the emergence of DeepSeek, a Chinese AI startup offering cost-effective AI models, has added competitive pressure, raising doubts about sustained demand for NVIDIA’s most advanced chips. While these risks are real, the AI sector remains in its early stages, and demand for high-performance computing is likely to continue growing, benefiting NVIDIA in the long run.
Despite the short-term pain, I’m maintaining my position in NVDA LEAPS, as the stock is now trading at 25x forward earnings, the lowest multiple in a year. This valuation presents a compelling buying opportunity for long-term investors who believe in NVIDIA’s dominant position in AI and data center growth. While further downside is possible, the long-term secular trends in AI, autonomous driving, and cloud computing remain strong. That said, it’s essential to manage risk and be prepared for volatility, as near-term market sentiment is still fragile. My focus now is on whether NVDA can regain momentum once the macroeconomic headwinds settle and institutional buyers step back in.
