Nvidia Stock Tumbles: AI Trade Uncertainty Lingers

Nvidia stock fell early Tuesday due to a hangover from its recent earnings, amid uncertainty about the artificial-intelligence trade. Despite a strong earnings report, investors remain cautious about the company's prospects. The slump in Nvidia stock is expected to continue, driven by concerns about the long-term viability of the AI market.

Nvidia's stock experienced a downturn early Tuesday, following its recent earnings report, as investors grapple with uncertainty surrounding the artificial-intelligence market. Despite Nvidia's strong financial performance, which included a 6% quarterly revenue growth and a 17% sequential increase in Blackwell Data Center revenue, investors remain cautious about the company's long-term prospects [3].

The earnings report highlighted Nvidia's leadership in the AI infrastructure market, with its Blackwell and H100 chips cementing its position. However, the company's stock has been impacted by broader concerns about the AI market's long-term viability and geopolitical risks. The Trump administration's proposed H20 chip export deal with China, which remains unimplemented, has added to the uncertainty [2].

Nvidia's earnings report also revealed that there were no H20 sales to China-based customers in the second quarter, a notable decrease from the previous year. This decline, coupled with the company's ongoing regulatory challenges in China, has raised concerns about its exposure to the country's market [3].

Investors are also grappling with the potential overvaluation of Nvidia's stock, which currently trades at a 48.9x P/E ratio. While this ratio is below its 10-year average of 52.77, it remains elevated compared to the U.S. semiconductor industry's average of 60.1x. The high P/E ratio reflects investors' optimism about the AI market's growth potential, but it also leaves little margin for error if growth slows or margins compress due to rising R&D costs or increased competition from Chinese chipmakers [2].

The AI market's promise has yet to fully materialize for most companies, with 95% of businesses not seeing any revenue from their AI investments, according to a recent MIT survey. This has led to concerns about the long-term viability of the AI market and the potential for a "bubble" to burst [1].

As Nvidia continues to navigate these challenges, investors will be closely watching the company's ability to balance its high growth and valuation. The AI race, as Jensen Huang notes, is a marathon, not a sprint, and Nvidia's long-term prospects remain intact, even as near-term uncertainties loom [3].

References:
[1] https://www.npr.org/2025/08/30/g-s1-86377/ai-nvidia-economy-stocks
[2] https://www.ainvest.com/news/wall-street-overconfidence-nvidia-ai-growth-signal-high-risk-high-reward-entry-point-investors-2508/
[3] https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-second-quarter-fiscal-2026