Nvidia is sliding after Trump escalates the trade war with China

Reuters

FILE PHOTO: Jensen Huang, CEO of Nvidia, shows the NVIDIA Volta GPU computing platform at his keynote address at CES in Las Vegas

• Nvidia was trading down 2.5% on Friday, after the US raised tariffs on $200 billion worth of Chinese goods to 25% from 10%.
• The semiconductor industry is particularly sensitive to the effects of increased tariffs.
• Watch Nvidia trade live.

An escalation in the trade war between the US on China sent Nvidia shares down by more than 2.5% on Friday. Semiconductors are particularly vulnerable to Chinese trade as the country is an important source of demand.

At 12:01 a.m. ET on Friday, tariffs on $200 billion worth of Chinese goods were increased to 25% from 10%. While talks continue, China has vowed retaliation should a resolution not be reached. One of those areas that China could go after is semiconductors.

"China is an important market and it's an important gaming market," said Nvidia President and CEO Jensen Huang on the company's quarterly earnings call.

The sector was hammered in the fourth quarter amid fears a trade war would continue without resolution. AMD and Nvidia both fell about 50% from their Q4 peaks before partially recovering in early 2019. As concerns began to ease, AMD rallied sharply, cutting its drop to 15% from its 2018 fourth-quarter peak. Nvdia is still down 43%.

"A major concern here, the products would be deemed mission-critical and the US would prevent shipments to China, or tax them heavily (a large buyer of GPUs)," RBC analyst Mitch Steves wrote in a recent note.

"We think China trade talks will negatively impact our universe. Most notably, we think GPUs and Semi-cap are most at risk to the downside if tensions continue to rise."

Nvdia reports first-quarter results next week, with analysts surveyed by Bloomberg expecting both revenue and earnings to fall from last year's numbers.

Nvidia is up 25% this year.

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