Nvidia shares skyrocket but tariffs still threaten AI boom
Shares in AI giant Nvidia have skyrocketed by almost a fifth after President Donald Trump paused his sweeping new tariffs for 90 days.
The move brought a brief, albeit potent, reprieve for Wall Street, triggering the Nasdaq’s largest single day gain in nearly a quarter of a century and reigniting investor appetite for the battered co-called magnificent seven.
Few companies rode the wave higher than Nvidia, long considered the crown jewel of the AI gold rush.
With its ultra-powerful GPUs [graphics processing unit] forming the backbone of generative AI systems from ChatGPT to autonomous drones, the tech titan has become the arms dealer of the artificial intelligence era – selling the shovels in Silicon Valley’s new gold rush.
Wednesday’s rally added $440bn to its market cap in just a day.
“This is clearly positive news for Nvidia, which is set to capture a large share of this year’s AI-related investment”, said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
“AI is a multi-decade opportunity, and falling behind now could mean the difference between being a leader in ten years or a name of the past.”
A tariff whiplash for AI
Yet, the optimism masks a deeper concern: even as tariffs were paused for some countries, Trump doubled down on Chinese imports, raising levies from 104 per cent, to 125 per cent.
That’s no small deal for Nvidia or its customers.
Much of the firm’s supply chain, and the broader AI ecosystem, depends on advanced manufacturing in Asia, particularly Taiwan and South Korea.
AI, while hyped and rapidly adopted, is still in relatively early commercial stages.
Most large tech firms pouring billions into data centres and GPUs have yet to reap direct benefits from their investments.
According to TD Cowen, cloud giants like Amazon are currently earning only 20 cents in revenue, for every $1 invested in generative AI infrastructure.
With Nvidia chips central to those expenditures, any slowdown in hyperscaler spending due to rising costs or political uncertainty could ripple fast.
Microsoft, for example, recently paused some data centre expansion plans, despite staying committed to more than $80bn in AI infrastructure in 2025.
“The tariffs rattle confidence”, said analyst John Blackledge. “And in an industry this young and capital intensive, confidence is currency.”
A fragile foundation
Despite the rally, Nvidia is coming off a volatile stretch.
The stock had dropped nearly 15 per cent in recent weeks, on fears that AI spending was peaking, and that cheaper open source models like China’s DeepSeek could cut into its dominance.
Add in tariff-driven cost pressures, and investor concerns had grown louder.
Still, Nvidia’s fundamentals remain robust. The firm booked over $130bn in revenue last year, and net income ballooned to $74 trillion.
Flagship AI chips and new Blackwell architecture continue to dominate demand, and Nvidia remains the go-to supplier for nearly every major AI initiative across the globe.
But, the road ahead is not without obstacles. The International Energy Agency warned Thursday that ongoing trade tensions and economic headwinds could slow AI growth significantly.
Electricity demand for data centres – projected to nearly double in the next five years – could run into grid limitations, regulatory bottlenecks, and costlier capital from investors spooked by global uncertainty.
Broader impacts on Nvidia
Trump’s tariff manoeuvring may have sparked a rebound for Nvidia and Big tech, but it’s also injected new volatility into a sector that thrives on scale and speed.
If chipmakers like Nvidia are the fuel powering AI, tariffs are sand in the engine.
“The uncertainty is the killer”, said Michael Shulman, chief investment officer at Running Point Capital. “AI needs supply chain clarity, cheap energy, and capital stability. Tariffs risk all three.”