Nvidia (NASDAQ: NVDA) has long been a darling of Wall Street, captivating investors with its impressive growth and innovative technology. However, recent trends indicate that this once unstoppable ascent may be hitting a plateau. Back in June 2024, Nvidia’s stock was trading around $138. Fast forward to today, and the price remains stubbornly close to that mark, suggesting a stagnation lasting for about eight months.
This apparent stability, however, masks a turbulent journey. Over the past several months, Nvidia’s stock has experienced significant volatility:
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August 2024: A sharp decline saw the stock plummet to $91.
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September 2024: A remarkable rebound brought it back up to $150.
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October 2024: Another drop occurred, with the price falling to $133.
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Current Status: As we approach the earnings report next week, the stock is bouncing back to around $138-139.
This rollercoaster ride raises questions about Nvidia’s future. Is this just a temporary lull, or are we witnessing the formation of a market top? Investors who have enjoyed the thrill of Nvidia’s rapid growth may need to brace themselves for a more challenging landscape ahead.
Chart Analysis
NVDA has shown a consistent upward trend over the past year, marked by a dotted rising support line and repeated higher highs and higher lows. Near-term resistance appears to be around the 150–151 range, while a key support zone sits around 124–125. Momentum indicators, such as the stochastic-like oscillator at the bottom of the chart, suggest that the stock recently dipped into oversold territory and has been rebounding. Volume levels shown in the upper-right region of the chart indicate moderate-to-strong trading interest. A decisive move and close above 150 on increased volume could confirm continued upward momentum.
- Overall uptrend with higher highs/higher lows
- Resistance near 150–151; support near 124–125
- Momentum turning bullish from oversold levels
- Stronger volume could bolster a breakout
The Numbers Don’t Lie: Growth Deceleration
When we dig deeper into Nvidia’s financial performance, the signs of deceleration become increasingly clear. While the company continues to post impressive numbers, they are not what they used to be:
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Quarterly Revenue Growth: This metric has slowed dramatically from an astonishing 265% year-over-year to a more modest 93.61%.
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Gross Profit Growth: Similarly, gross profit growth has decreased from 339% to just 95%.
These figures, while still enviable by most standards, highlight a concerning trend: Nvidia’s explosive growth is beginning to wane. The projected revenue for the upcoming quarter stands at $38.09 billion, which represents a robust 72% increase compared to the same period last year. Yet, this slowdown in growth raises eyebrows among analysts and investors alike.
Adding to this unease is Nvidia’s valuation. Back in June 2024, the company had a price-to-sales (P/S) ratio of 40—an indicator that many deemed excessively high. While it has since dropped to 30, it still resides in what many consider “bubble territory.” This high valuation combined with slowing growth creates a precarious situation for investors who may be looking for continued upward momentum.
The DeepSeek Effect: A Game-Changer for Gen AI?
In an unexpected twist, Nvidia now faces competition from an emerging player in the AI space: DeepSeek. This Chinese company has developed a highly capable large language model (LLM) at a fraction of the cost incurred by major U.S. tech giants like Microsoft and Google. What does this mean for Nvidia? It suggests that fewer chips—and potentially less advanced ones—may be required for future AI models.
The implications of this development could be profound:
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Reduced Demand for High-End AI Chips: If companies can achieve similar results with less powerful hardware, demand for Nvidia’s premium products could decline.
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Potential Slowdown in AI-related Capital Expenditure (Capex): Major tech firms may reconsider their investments in AI infrastructure as they adapt to these new dynamics.
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Pressure on Nvidia’s Revenue Projections: If capex decreases, so too could Nvidia’s revenue from its core business.
The DeepSeek innovation has sent ripples through the tech industry, prompting discussions about how it might reshape the competitive landscape for AI technologies.
Earnings Report: A Moment of Truth
As we approach February 26th—the date when Nvidia is set to report its earnings—anticipation is building among investors and analysts alike. Historically, Nvidia has been known for its ability to exceed expectations; a “triple beat” on earnings and revenue has become something of a norm. However, this time feels different.
Expectations are set high:
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Earnings Per Share (EPS): Analysts predict EPS will come in at $0.84—a modest increase of about 3.7% from the previous quarter.
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Revenue Expectations: Forecasts suggest revenue will reach approximately $88.09 billion—an increase of around 8.5% from last quarter.
While these numbers may seem promising at first glance, they don’t reflect the explosive growth that investors have come to expect from Nvidia over recent years.
The real question looms larger: What will Nvidia say about its future? Will it acknowledge the potential impact of DeepSeek on its business? A disappointing guidance could not only affect Nvidia’s stock price but also trigger a broader reassessment of the Gen AI bubble that has fueled much of the tech sector’s recent gains.
The Bottom Line: Proceed with Caution
Nvidia’s story is far from over, but it’s clear that investors should approach with caution as we enter this pivotal moment. The combination of slowing growth rates, sky-high valuations, and potential disruption from innovations like DeepSeek creates an environment ripe for uncertainty.
While Nvidia has defied skeptics before and shown remarkable resilience in navigating challenges, the current landscape suggests that it may face some of its most significant hurdles yet. As we await next week’s earnings report, one thing is certain: all eyes will be on Nvidia as it navigates this critical juncture in its journey.
Will it continue to soar? Or are we witnessing the beginning of a new chapter—one where caution becomes the watchword for investors? Only time will tell if this tech titan can maintain its position or if it will succumb to the pressures mounting from both within and outside its walls.
