The Risk Factors to Watch Out For in NVIDIA Stock
NVIDIA (NVDA) has stumbled before. Its stock has plunged more than 30% within a span of less than 2 months on as many as 8 different occasions in recent years, wiping out billions in market value, and erasing massive gains in a single correction. If history is any guide, NVDA stock isn’t immune to sudden, sharp declines.
NVIDIA’s meteoric ascent throughout 2025, fueled by insatiable AI demand and dominant data center performance, has propelled its valuation to unprecedented heights. Yet, this very momentum breeds fragility: a consolidating market with intensified competition from AMD and Intel, persistent geopolitical export hurdles in key regions, and the specter of an “AI bubble” could leave its lofty perch vulnerable to any shift in the relentless pace of generative AI investment.
What Could Send The Stock Crashing?
- Custom AI Chips: Hyperscalers (Google, Amazon, Microsoft) are deploying custom AI chips, optimized for cost/inference, impacting NVIDIA’s market share; Amazon claims 50% savings. NVIDIA’s CUDA ecosystem and rack-scale offerings mitigate this.
- Rival Chipmakers: AMD (MI300 series) and Intel (Gaudi) intensify competition in AI accelerators, projecting to erode NVIDIA’s 80-90% market share to 60-70% by 2027-2028. NVIDIA’s strong CUDA moat and Blackwell GPU sales remain key advantages.
- China Export Bans: US export controls, like the April 2025 H20 ban costing NVIDIA $5.5B, and China’s push for domestic chips, pose significant risks. Recent limited H200 export approval offers $25-30B revenue, but Chinese regulatory hurdles persist.
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.
Is Risk Showing Up In The Company’s Financials Yet?
Let’s take a look at fundamentals
- Revenue Growth: 65.2% LTM and 91.6% last 3-year average.
- Cash Generation: Nearly 41.3% free cash flow margin and 58.8% operating margin LTM.
- Valuation: NVIDIA stock trades at a P/E multiple of 45.8
| NVDA | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Semiconductors | – |
| PE Ratio | 45.8 | 23.5 |
|
|
||
| LTM* Revenue Growth | 65.2% | 6.0% |
| 3Y Average Annual Revenue Growth | 91.6% | 5.4% |
|
|
||
| LTM* Operating Margin | 58.8% | 18.8% |
| 3Y Average Operating Margin | 55.8% | 18.3% |
| LTM* Free Cash Flow Margin | 41.3% | 13.4% |
*LTM: Last Twelve Months
If you want more details, read Buy or Sell NVDA Stock.
The Right Way To Invest Is Through Portfolios
Individual stocks can soar or tank but one thing matters: staying invested. The right portfolio can help you stay invested, capture upside and mitigate the downside associated with any individual stock.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.