Why Has Nvidia Stock Rallied 40% Over The Last Month?
Nvidia (NASDAQ:NVDA) stock has surged by close to 11% over the last week and remains up nearly 40% over the past month. While broader markets have rallied after China and the U.S. announced a 90-day pause on tariffs, seen as a step toward de-escalating the global trade war, there have been several company-specific positives for Nvidia as well.
Nvidia Setting AI Standards
Nvidia has launched NVLink Fusion, a new chip-to-chip interconnect technology designed to boost the performance of AI systems. Notably, the company says it will license the technology to other chip designers, enabling them to build fast and powerful custom AI chips. This helps third-party vendors create semi-custom AI systems that still integrate with Nvidia’s ecosystem. The move expands Nvidia’s influence in the custom AI hardware market beyond its own chips. Companies like Marvell and MediaTek plan to incorporate Fusion into their custom AI system designs. This could be a smart long-term move for Nvidia, as it might be able to get companies to lock into its software stack. It could be a step towards Nvidia setting up de facto standards for AI hardware, much like how Intel shaped the PC industry with its x86 architecture.
Big Saudi GPU Orders
During President Donald Trump’s visit to the Middle East earlier this month, Nvidia CEO Jensen Huang announced that the company would supply over 18,000 Blackwell AI chips to Saudi Arabia-based AI startup Humain for use in its AI data centers. The so-called “sovereign AI” market, which includes state-backed initiatives to develop domestic AI capabilities, is becoming increasingly important to Nvidia as it looks to reduce its reliance on U.S. tech titans. Companies including Amazon, Meta, Google, and Microsoft are collectively estimated to account for over 50% of Nvidia’s revenue. Many of these companies are also developing their own AI chips, making it even more crucial for Nvidia to hedge its bets.
Nvidia Stock Has Remained Volatile
Now, the increase in NVDA stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 125% in 2021, -50% in 2022, 239% in 2023, and 171% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, and less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could NVDA face a similar situation as it did in 2022 and underperform the S&P over the next 12 months, or will it see a strong jump?
We value Nvidia stock at about $101 per share, roughly 25% below the current market price. See our analysis of Nvidia valuation: Expensive or Cheap. There are a couple of reasons why we are negative on the stock at the moment. We see a possibility that the “fear-of-missing-out” driven AI wave seen over the last two years could ease due to diminishing incremental performance gains from larger models, and also as the availability of high-quality training data becomes a bottleneck. This shift toward more efficient models could compound the impact of a potential slowdown for GPU makers such as Nvidia.
While Nvidia stock has been a stellar performer over the last few years, stocks can drop sharply – 20%, 30%, even 50% –as we’ve seen during past market shocks. No stock is immune. How low can Nvidia stock go in a market crash? It’s good to stay informed.
Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates