Amazon and Nvidia: Opportunities Emerge Amid Market Decline

Investing in the stock market can be a strong wealth-building strategy, yet it carries inherent risks. The ongoing trade tensions between the U.S. and various countries exemplify this uncertainty. Nevertheless, with the Nasdaq Composite plummeting over 20% this year, investors may find long-term opportunities in this chaos.

Let’s delve into why stock in Amazon (NASDAQ: AMZN) and Nvidia (NASDAQ: NVDA) might soon become attractive buying options.

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Why Amazon is a Company to Watch

Amazon’s shares have dropped 22% year to date amid rising global trade uncertainties. This decline isn’t surprising, given the company’s expansive retail operations worldwide. However, while the company navigates short-term difficulties, its primary sources of profit appear relatively insulated from these issues.

One key factor is Amazon Web Services (AWS), the company’s cloud-computing division, which largely focuses on digital services less affected by tariffs. During the fourth quarter, international e-commerce accounted for 23% of total revenue ($43.4 billion), yet only provided $1.3 billion in operating income, roughly 6.2% of the total. Notably, Amazon exited the Chinese market in 2019 due to regulatory complexities and intensified local competition.

Ultimately, Amazon’s e-commerce segment is deeply reliant on the American consumer, offering a degree of protection from geopolitical turbulence. While tariffs may elevate domestic product prices, they could also eliminate foreign competitors like Temu and Shein, which threaten Amazon’s market position with their low-cost goods transported from China. These imports now face an additional 34% tariff.

Despite facing significant uncertainties, Amazon’s forward price-to-earnings (P/E) ratio of 26 suggests that much of the immediate market concerns have already been factored into its valuation.

Nvidia’s Potential for Investment

Meanwhile, Nvidia’s shares are down 27% this year, presenting a potential opportunity for investors. Those who missed the significant gains in 2023 and 2024 may soon be able to acquire shares at attractive prices. Like Amazon, Nvidia’s operations are somewhat shielded from tariff-related issues.

The Trump administration has exempted semiconductors from import tariffs, which are currently 32% on Taiwan. Additionally, Nvidia’s main clients include major U.S. tech companies such as Amazon, Alphabet, and Meta Platforms, all of which are likely to continue purchasing Nvidia’s graphics processing units (GPUs) to stay competitive in the evolving landscape of generative artificial intelligence (AI).

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Moreover, Nvidia is shifting its supply chains to the U.S. The company has partnered with Taiwan Semiconductor Manufacturing to produce its flagship Blackwell-based AI chips at their Arizona facility. This localization push may help protect Nvidia from political pressures in both U.S. and foreign markets.

According to J.P. Morgan, there’s a 60% chance of a U.S. recession by 2025, raising questions about future demand for AI chips. Despite these risks, Nvidia’s forward P/E ratio stands at just 22, making it a compelling option compared to the S&P 500’s average estimate of 24.

Navigating Trade Risks in America

The volatility introduced by Trump’s tariff plans has fostered uncertainty in financial markets; however, the U.S. economy appears better positioned to cope than its international counterparts. Exports account for just 11% of U.S. gross domestic product (GDP), contrasted with 19% in China and a striking 43% in Germany. Internal consumption is a significant driver of the U.S. economy, constituting 68% of its GDP.

This resilience may help mitigate economic damage if trade tensions escalate, allowing for more favorable outcomes in negotiations. While investors may prefer to hold off on purchasing stocks until the situation improves, opportunities could arise as valuations of leading American companies descend into more appealing price ranges.

Is Now the Right Time to Invest $1,000 in Nvidia?

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John Mackey, formerly CEO of Whole Foods Market, which is now an Amazon subsidiary, serves on The Motley Fool’s board of directors. Similarly, Suzanne Frey, an executive at Alphabet, is also a board member of The Motley Fool. Randi Zuckerberg, a former director at Facebook and sister to Meta’s CEO, is a member as well. Will Ebiefung holds no shares in the stocks mentioned. The Motley Fool endorses and has investments in Alphabet, Amazon, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing and has a disclosure policy.

The views expressed here are the opinions of the author and do not necessarily reflect those of Nasdaq, Inc.