Can NVIDIA Stock Withstand These Pressures?

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. China Antitrust & Regulatory Entrapment
2. Accelerating Competitive Encroachment
3. Deteriorating Quality of Earnings

Risk 1: China Antitrust & Regulatory Entrapment

• Details: Forced remedies or fines from antitrust ruling, impacting gross margin; Valuation de-rate due to permanent loss of China market share
• Segment Affected: Data Center
• Potential Timeline: Immediate to Q2 2026
• Evidence: China’s regulator ruled NVDA violated antitrust laws in Mellanox deal (Sept 2025); New rules require Chinese buyers to purchase domestic chips for every H200 imported (Jan 2026); Reopened China market access comes with new 25% revenue-sharing tariff (Jan 2026)

Risk 2: Accelerating Competitive Encroachment

• Details: ASP erosion from direct price competition with AMD’s MI series, Market share loss in key emerging markets like India
• Segment Affected: Data Center
• Potential Timeline: Next 2-3 Quarters
• Evidence: AMD reported 32% growth in its Data Center segment for full-year 2025 (Feb 2026 Earnings Call); AMD announced partnership with Tata to deploy AI data center infrastructure in India, directly targeting NVDA’s growth vector (Feb 2026); Arista Networks’ CEO noted a growing share of AI deployments is shifting toward AMD (Feb 2026)

Risk 3: Potentially Lower Quality of Earnings

• Details: Negative operating cash flow conversion despite high net income
• Segment Affected: Company-Wide Financials
• Potential Timeline: Q1 2026 – FY 2027
• Evidence: Receivables from major customers rose from 24% average to 65% of total, indicating weaker bargaining power (Q3 FY26 data, reported Dec 2025). Working capital consumed $2.9B to generate $10.26B in revenue growth, a sign of inefficient, cash-burning growth (Q3 FY26 analysis, Nov 2025)

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 46.1

*LTM: Last Twelve Months

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

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