By almost every financial metric, 2025 should have been a victory lap for NVidia (NASDAQ: NVDA). Yet, in a year where the AI narrative only gathered steam, a strange divergence emerged: Nvidia’s stock began to stall.
While peers like Broadcom and TSMC capitalised on the sector’s momentum to hit fresh highs, the poster child of the silicon revolution has spent months churning sideways, leaving investors to wonder if the market has finally priced in perfection.
That raises an uncomfortable but timely question for investors. Is this the calm before another surge, or a warning sign that the easy money has already been made?
Why Nvidia still has plenty going for it
Start with the numbers, and look at the actual cash registers. In its most recent quarter, Nvidia reported revenue of $57bn, up 62% year on year. Net income jumped 65% to $31.9bn. Those are not the figures of a business running out of steam.
Looking ahead, management expects fourth-quarter sales of around $65bn, comfortably ahead of the $62bn analysts had pencilled in. Demand for its latest Blackwell chips, according to CEO Jensen Huang, is “off the charts”. That matters because data centres remain the engine room of Nvidia’s profits.
There is also growing visibility on future demand. Nvidia has flagged a combined order pipeline of roughly $500bn covering Blackwell, the upcoming Rubin architecture and networking products. Around $300bn of that is expected to be recognised in 2026 alone. Deals with OpenAI and Anthropic, including a $30bn compute agreement backed by Microsoft, sit on top of that already chunky backlog.
Zooming out further, the industry tailwinds remain powerful. Goldman Sachs expects hyperscalers such as Microsoft, Alphabet, Amazon and Meta to spend around $500bn on AI capital expenditure next year. McKinsey believes AI infrastructure could become a $7trn market over the next five years. Nvidia does not need to win all of that to keep growing at an impressive clip.
Valuation is also starting to look less intimidating than many assume. Nvidia currently trades on a forward price-to-earnings ratio of about 23 and a price-to-sales ratio of 23.3. Earlier in 2025, those figures were north of 30, and in some quarters much higher. Several analysts argue that for a company growing profits at this pace, that multiple is no longer extreme.
Bank of America, Bernstein and Jefferies all retain buy ratings, with price targets between $250 and $275. One useful comparison comes from Bank of America, which estimates Nvidia’s 2026 and 2027 PEs imply a PEG ratio of roughly 0.5. That compares with an average of around 2 for other mega-cap growth stocks.
The reasons for caution
That said, Nvidia is not without risks, and they are becoming harder to ignore.
Competition is intensifying. Broadcom’s custom AI chips are gaining traction, AMD is closing performance gaps, and Google continues to push its in-house TPUs. While Nvidia argues it remains at least a generation ahead, the days of near-total dominance may be numbered.
Geopolitical friction further complicates the outlook, with uncertainty over Chinese export licenses and tariffs transforming a former growth engine into a constant source of volatility. The era of easy access to the Chinese market appears over; even a resumption of H200 shipments would likely come with tighter margins and more restrictive terms, forcing investors to weigh the ‘China discount’ more heavily than ever before.
There is also the broader concern that AI spending could slow if returns disappoint. Investors still remember the dotcom era, when capital spending ran ahead of reality. The difference today is that Nvidia is already highly profitable, but that does not make the shares immune to sentiment swings. SoftBank’s decision to sell its entire Nvidia stake has added to fears that parts of the market may be overheating.
Finally, the stock is no longer cheap in absolute terms. Even after recent underperformance, Nvidia shares are up more than 30% over the past year and nearly double their April lows. A trailing PE of around 45 will still give value investors pause.
So, is Nvidia still a buy?
For long-term investors, the balance of evidence still tilts in Nvidia’s favour. The company sits at the centre of a structural shift in computing, not a passing fad. Its technology lead, expanding product range and growing backlog suggest earnings momentum can carry well into 2026 and beyond.
That does not mean the ride will be smooth. Competition, politics and valuation nerves will continue to rattle the share price. But with multiples compressing even as profits surge, Nvidia looks less like a bubble stock and more like a high-quality growth business going through a pause.
For those willing to stomach volatility and think beyond the next quarter, Nvidia still looks like one of the most compelling ways to back the AI revolution.