Why Shares of Nvidia Are Sinking Today

After a face-melting rally yesterday that saw shares of Nvidia (NASDAQ: NVDA) surge over 15%, shares once again found the red today, trading about 5% lower as of 10:22 a.m. ET. Analysts at Morgan Stanley issued a new research report on the company this morning, while the broader market gave back some of its gains, with the tech-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) down over 3%.

The tariff saga is not over

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Although the 90-day pause from Trump yesterday removes what many investors viewed as a worst-case scenario, analysts at Morgan Stanley said, "This is not over." While company-specific risks to Nvidia are "fairly minimal" because the company is still experiencing strong near-term demand, macro risks remain, because base 10% tariffs are still in effect and the "challenges imposed by tariffs are still daunting."

Morgan Stanley remains overweight on Nvidia, with a $162 price target, implying significant upside from current levels. The analysts, however, make a good point. Trump's 25% tariff on steel, aluminum, and automobiles are still in place, as are 124% tariffs on China. While Trump seemed optimistic in his remarks yesterday that the U.S. and China would arrive at a deal, it's certainly no guarantee, because China seems to be holding tough.

Furthermore, new data this morning showed that inflation eased in March, but that hasn't done much to calm investors today. Some may see signs of further deterioration in the economy, while others may still be concerned that tariffs could stoke inflation in the months to come.

Not out of the woods, but there's hope

After so much volatility over the last five trading days, it's hard to get back to business as usual, and much uncertainty remains. Nvidia will be looking for capital expenditures on artificial intelligence to stay robust.

The stock trades around 25 times forward earnings, below a five-year average of roughly 35. While there are still near-term risks, the risk-reward proposition looks a lot better for long-term holders.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.