Let's imagine together. A fund manager gives you investment advice and talks about a company. He says that the products of this company are so good that they end up on the black market. Large companies, universities and even states resort to illegal means to buy the products of this company, they risk illegality. Smuggling routes and networks have been established to deliver these products to customers and you can buy the stocks of this company. You would probably think that this company would run away. You would think that the enormous stocks of a company that produces such a product in such high demand would also go up. However, stock markets can sometimes make such stocks fall sharply. Our latest example is Nvidia. Nvidia has retreated by 25% from its peak. It lost 8.5% of its value in a single session on Monday.

Thus, it melted and finished 300 billion dollars in one day. Since it is the second most valuable company in the world after Apple and has a strong place in stock market indices, it pulled all stock markets down on Monday. This was not the only issue that fell on stock markets on Monday. Uncle Trump made some statements about tariffs again. That also broke morale, but Nvidia alone has the power to pull down those stock markets. So what's happening? Have Nvidia chips really fallen into the hands of smugglers? Are criminal organizations being established in the world about this? Why is the stock of Nvidia, which produces such a demanded product, falling? Is it meaningful? We will evaluate all of these together. I think it will be a truly interesting and mind-opening article.

First, let's take a look at the stock's movement. There was a real massacre and it started to fall sharply on Monday. Although it recovered for a while after the opening, it closed the entire day with a minus of 8.5%. Its market value of nearly $300 billion melted away. So what happened on Monday? What kind of news came about Nvidia? Is there no demand for the company's products? Is there a decrease in its turnover? Has its CEO died? Has a bomb fallen in its factory? No, none of these news came. Much more entertaining news came. The Wall Street Journal published an article explaining that Chinese companies, Chinese universities and even the Chinese state have found ways to bypass American bans to access Nvidia chips, in other words, they are buying these chips illegally. The Chinese are trying to get Nvidia chips illegally and this is causing the stock to fall. We will come back to this topic in a moment.

The news actually describes an investigation launched in Singapore on Monday. The Singapore government initiated an investigation with the suspicion that Nvidia pairs passing through them were going to Malaysia and from there to China. The Singapore government does not want to be at odds with the US. It does not seem right to be at odds with the US these days and it also knows that the US does not want Blackwell chips, in particular Nvidia's latest technology chips, to go to China. Very serious bans were imposed on this issue during the Biden era. Trump did not lift them either. There are rumors that Trump may even tighten those bans. This was one of the issues that caused the stock to fall on Monday.

How did the system work? They bring the chips to Singapore through legal channels, and from there they sell them to a company in Malaysia that America has not banned. That company is sending the chips to China illegally. There are very concrete news that many companies in China, university research laboratories have obtained these chips. Don't just think of it as chips, of course. These act as servers. In other words, there are large servers manufactured by SMCI or Dell that have Nvidia chips inside, and the price of each of these is around $600,000. In other words, these are very high-priced products. In fact, this is why not only Nvidia but also SMCI and Dell fell sharply on Monday. These servers are apparently reaching China illegally.

If you want the details of the news, you can find them and read them, we won't go into it too much. But why does this make the stock drop? I guess my logic works a little differently. I'm saying that if people resort to smuggling and illegal means to obtain the products of the company I invested in, if networks and criminal organizations have been established in this regard, and if you read the rest of the article, you will see that similar operations are taking place in many countries. Then this means that there is a huge demand for this company's products. Do you think there may be a problem with the sales of the company where customers are trying to obtain the product illegally? Could there be a problem with sales growth? After the artificial intelligence revolution started in 2022, the company is experiencing incredible growth. It achieves growth of 101% - 205% - 265% from quarter to quarter. But then Nvidia is a very small company. Of course, due to the rule of large numbers, growth slows down after a while. It drops to 262%, from there to 124%, 93.6% and 77.90% in the last quarter. This is where they come to the following conclusion. They say that this company's growth is slowing down. The slowing growth is 77.9%.

Moreover, the company says that we are experiencing difficulties in bringing the production lines of the new Blackwell chips to full efficiency, which is called ramp-up. Because it is a complex product, we are just starting to put it into operation. Despite that, we produced about 11 billion dollars worth of Blackwell chips in the last quarter. The speed of this production will increase in the coming period, and we should increase it. Because right now, the demand is 10 times our production capacity. The CEO himself says this. But the stock market is not convinced. The Chinese are trying to buy this product illegally. The stock market is not convinced either and says that there is a demand problem in this company. Maybe the real issue is not the demand problem, but the fact that not enough products can be shipped due to production difficulties, supply chain difficulties.

Secondly, such huge growths are already unsustainable. But if you call 77% year-on-year growth small, I know nothing about it. By the way, there is 11% growth from quarter to quarter. The second issue discussed about the company is gross profit. At its peak, the company's gross profit reaches 78.4%, then declines from there and drops to 73% in the last quarter. In this case, it is said that there is probably competitive pressure on the company. The company says that the issue is not that, we are experiencing efficiency problems while getting production back on track. This is called "yield rate". In other words, it is the ratio of the number of quality products that can be obtained from a production line. We are experiencing problems here. It has not yet settled down, they are producing these together with TSMC, we are trying to solve them. When we solve these, we will reach around 75% gross profit again from the second half of the year.

How can you drop to 73%? Does this show that there is competitive pressure on the company? Now you will say that since there is demand for the product even at an illegal level, they should increase the prices even more. They have already increased it a lot, after a while I think they are being merciful and they probably have long-term contracts with companies like Google and Amazon. They cannot play with those prices because of these long-term contracts. This also puts some pressure on the profit margin in the short term. Because there is a production efficiency problem. There are increased costs there, we cannot explain this to the market. Then they say that the company's sales growth has slowed down, this should be reflected in the valuation. It has already been reflected, if you look at the company's price-earnings ratios, it reached 240 at its peak, and today it is 38.8. If you look at the forward-looking price divided by earnings, it reached 50 at its peak, and it is currently 25.39. In fact, the valuations of the sudden rapid turnover growth have left the company, but the company is still expensive, and the value of the company will fall even further.

Maybe, markets are places that like to remain irrational, and the general spirit of the market is reflected in the stock price. There is so much negative news about Nvidia lately that it is quite possible for Nvidia to fall. Because investors are scared, and on the other hand, Trump's tariffs etc. are already confusing the market in general. But if you say that this stock has become expensive and that's why they are selling it, you are making a big mistake. Because I remind you again, smuggling routes have been established for this company's products, mafias have been formed. Market professionals don't care about all this noise anyway.

You can see the views of Wall Street analysts on Nvidia stock on the Tipranks website, they are generally buy. They have recently updated their views and believe that the stock can go up by 57% and reach a price of $179.28. When we look at the valuations of a total of 38 Wall Street analysts, there are 35 buy and 3 hold. Maybe Wall Street analysts are not so wrong. You can make valuations on the professional version of investing.com according to different valuation models. You can change some indicators. When we look at the average of different evaluation systems, the target price of the stock is $123.92 and there is a probability of going up by 8.8%. The math works here and the general rating for the company is great performance, meaning they say it is a great company.

Now, this is what I understand from investing. I want the company I invest in to grow. Is Nvidia growing, is it growing, will it grow even more, is there a lot of demand for its products, there is so much demand that smuggling will be done. In this case, I don't think it will have a profit margin problem. They say that Nvidia will have competitors. I am an investor in AMD, but for example, if you compare AMD's recent growth rate with Nvidia, Nvidia is crushing AMD. Instead of Nvidia's chips, Amazons and Metas will develop their own chips. That game is not like that, they develop those chips for different purposes, much more specific reasons, and more importantly, Nvidia has a tremendous capacity for innovation.

They are currently in the ramp-up of the first version of the Blackwell chips. They say they will switch to a new version in the second half of the year. Competitors cannot keep up with Nvidia's innovation speed, and Nvidia is not just a microchip manufacturer. It is also a giant company that offers many different products and services in the field of robotics and autonomous driving. From here, Nvidia's stock may or may not go down. Market panic can take many stocks to prices they are not at.

I like this type of panic. What I am telling you is of course not an investment advice. It is not possible to read what will happen in the short term, but in my 5-year vision for Nvidia, I see a much bigger company than today. Maybe its products will not always be smuggled, maybe there will not always be black markets. But Nvidia still has a long way to go, and I do not find it wise to sell a company if its products are on the black market and mafias are established on it. These are my views.

The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.