3 Key Risks That Could Drag Down 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.

Specifically, we see these risks:

1. Bloating Accounts Receivable & Channel Saturation
2. Hyperscaler Bargaining Power & In-House Competition
3. China Antitrust Investigation Escalation

Risk 1: Bloating Accounts Receivable & Channel Saturation

• Details: Future revenue growth miss due to pull-forward of demand, Valuation de-rating on deteriorating cash flow quality
• Segment Affected: Data Center
• Potential Timeline: Next 2 Quarters
• Evidence: Accounts Receivable surged to $33.39 billion, a 45% increase since the start of the fiscal year (Q3 FY’26 Filing), Days Sales Outstanding (DSO) has expanded to 53.5 days, up from a historical average of 46 days (Q3 2025)

Risk 2: Hyperscaler Bargaining Power & In-House Competition

• Details: Gross Margin compression from mid-70s towards high-60s, P/E multiple contraction as market reprices from ‘sole-source’ to ‘competitive’ supplier
• Segment Affected: Data Center
• Potential Timeline: Next 12-18 Months
• Evidence: Major cloud service providers are developing and expanding their own custom AI accelerators (e.g., Google’s TPUs) to reduce reliance on NVDA (Dec 2025), Increased analyst commentary on hyperscalers seeking supply diversification with AMD and Intel to gain pricing leverage (Jan 2026)

Risk 3: China Antitrust Investigation Escalation

• Details: Significant fines eroding net income, Forced operational changes or remedies impacting China business structure, potentially including the Mellanox unit
• Segment Affected: Data Center & Networking
• Potential Timeline: Next 6-12 Months
• Evidence: China’s State Administration for Market Regulation (SAMR) issued preliminary findings against NVIDIA for non-compliance with 2020 Mellanox merger remedies (Sept 15, 2025), The probe was officially moved to an ‘in-depth investigation’ phase, with the situation remaining unresolved (Jan 20, 2026)

What Is The Worst That Could Happen?

Looking at NVDA’s risk during big market shocks tells a clear story. It plunged 68% in the Dot-Com crash and 85% in the Global Financial Crisis. The 2018 selloff and inflation shock both hit it by over 55%. Even the Covid dip cut nearly 38% from its peak. No crisis spared it sharp drops.

But the 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 Financials Yet?

• 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 43.7

*LTM: Last Twelve Months

If you want more details, read Buy or Sell NVDA Stock.

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