3 Forces That Could Shake NVIDIA Stock
NVIDIA (NVDA) has stumbled before. It’s stock plunged > 30% in span of less than 2 months 8 times in multiple years, wiping out billions in market value, and erasing massive gains in single correction. If history is any guide, NVIDIA (NVDA) stock isn’t immune to sudden, sharp downturns.
While NVIDIA’s stock has surged on the relentless demand for its AI hardware, propelling its market valuation to unprecedented heights over the past year, this very momentum breeds new vulnerabilities. The insatiable appetite for AI chips has drawn intensified competition from rivals and even its largest cloud customers designing proprietary silicon, while lingering geopolitical tensions underscore the fragility of its critical supply chains, hinting that even market dominance can harbor seeds of future uncertainty.
What Could Send The Stock Crashing?
- China Market Loss: US export controls and growing domestic competition from players like Huawei are projected to reduce NVIDIA’s AI chip market share in China from 66% in 2024 to 54% in 2025, impacting a significant market opportunity.
- Custom AI Silicon: Major hyperscalers (Google, Amazon, Microsoft, Meta) are increasingly developing their own custom AI chips, such as Google’s Ironwood TPUs, to reduce reliance on NVIDIA and optimize for specific workloads, especially in the burgeoning inference market.
- Rival Chip Acceleration: AMD’s Instinct MI300X series, with the MI350X launching in H2 2025, and Intel’s Gaudi 3 are gaining traction in AI accelerators, with AMD’s AI chip division projected to reach $5.6 billion in 2025, intensifying competitive pressure on NVIDIA.
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Is Risk Showing Up In Financials Yet?
Let’s take a look at fundamentals
- Revenue Growth: 71.6% LTM and 92.0% last 3-year average.
- Cash Generation: Nearly 43.6% free cash flow margin and 58.1% operating margin LTM.
- Valuation: NVIDIA stock trades at a P/E multiple of 52.6
| NVDA | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Semiconductors | – |
| PE Ratio | 52.6 | 23.5 |
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| LTM* Revenue Growth | 71.6% | 6.1% |
| 3Y Average Annual Revenue Growth | 92.0% | 5.4% |
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| LTM* Operating Margin | 58.1% | 18.8% |
| 3Y Average Operating Margin | 51.0% | 18.2% |
| LTM* Free Cash Flow Margin | 43.6% | 13.5% |
*LTM: Last Twelve Months
If you want more details, read read Buy or Sell NVDA Stock. Nevertheless, ask yourself – Is holding NVDA stock risky? Of course it is. High Quality Portfolio mitigates that risk.
What’s The Worst That Could Happen?
Looking at NVIDIA’s history during market downturns shows there’s still plenty of risk despite its strengths. The stock fell about 85% in the Global Financial Crisis and 68% in the Dot-Com crash. The 2018 sell-off and inflation shock each saw declines north of 55%, with the latter around 66%. Even the Covid dip, which was relatively brief, pulled the stock down nearly 38%. Solid fundamentals matter, but when the market turns, NVDA isn’t immune to sharp drops.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read NVDA Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
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