NVIDIA (NASDAQ:NVDA) has been among the best-performing investments of the past several years. Despite the returns it has delivered to shareholders, the share price is now under significant pressure.
NVDA’s 52-week high was $153.13, but the stock has been hovering over 30% lower in recent weeks, so will NVIDIA be able to return to its 52-week high, or is the AI chip giant’s momentum finally giving out?
Key Points
- NVIDIA’s AI chip sales are booming, with 114% revenue growth last year and new high-powered chips on the way.
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Rising tariffs could pressure margins, though Taiwan-made chips are exempt.
- The stock may take time to recover, but strong fundamentals support a return to previous highs.
Has Demand for NVIDIA Chips Slowed?
One of the first questions to ask about NVIDIA is whether its growth could be running out of steam.
With its stock still priced at 34.6x earnings and 19.4x sales, NVIDIA must report decent bottom line increases in order to justify the premium valuation of its shares. If demand for AI chips slows, therefore, it’s likely that the stock will continue to move lower.
This, however, doesn’t actually seem to be the case. For the full year of 2024, NVIDIA’s revenues rose by 114% to $130.5 billion.
Even from Q3 to Q4, the company’s revenues climbed by 12%, demonstrating just how fast demand for chips was growing in the second half of last year. GAAP earnings also skyrocketed, gaining 147% to reach a full-year total of $2.94.
Of particular interest is the fact that NVIDIA’s Blackwell GPUs were backordered by about 12 months as of last October. With a 1-year backlog and an undisputed leading position among AI chip producers, it’s difficult to see NVIDIA’s sales suddenly falling off a cliff unless a major and unexpected technological disruption occurs.
NVIDIA has also developed two new cutting-edge GPUs, the Blackwell Ultra and the Vera Rubin, which are slated to be released in the second half of 2025 and in 2026. Both are significantly more powerful than the current crop of chips and have the potential to ignite revenues in upcoming years.
Demand is not likely to abate any time soon because new reasoning models and other types of AI will require more computing power than ever before, leaving ample room for further sales of NVIDIA’s new chips.
All told, analysts are expecting annualized EPS growth of around 35% from NVIDIA over the next 3-5 years. It’s worth noting that the current outlook could cause the company to fall significantly short of these numbers. Even taking that into account, however, it appears that demand for NVIDIA’s chips remains strong and that the business has good prospects for continued growth.
How Rising Tariffs Could Affect NVIDIA
Another factor in NVIDIA’s selloff is the ongoing effect of the Trump administration’s drastic new tariffs. On a trailing 5-day basis alone, NVIDIA shares are down more than 8.5%, a reaction both to Trump’s tariffs on foreign countries and China’s decision to impose reciprocal tariffs on the US.
Tariffs are broadly believed to negatively impact the entire US electronics and semiconductor space, including NVIDIA. Because many unfinished components are imported, companies like NVIDIA are strongly tied to global supply chains.
Although demand for NVIDIA’s chips may very well prove strong enough to overcome the negative effect of higher input costs, it seems clear that tariffs will be doing neither NVIDIA nor any other chipmaker any favors in terms of profitability.
It is worth acknowledging that the tariffs unveiled this week have a special carve out for chips coming from Taiwan. Most of the world’s advanced chips, including NVIDIA’s, are made by the TSMC in Taiwan.
Initially, the 32% tariff the Trump administration placed on Taiwanese goods looked even worse for companies like NVIDIA than it really was, but news of the chip exclusion mitigated the worst of these concerns.
Nevertheless, other electronic components that are crucial to NVIDIA will be subject to tariffs, meaning that it won’t be able to get around the negative effects of tariffs altogether.
Will NVIDIA Return to Its 52-Week High?
Over a 3 year timeline, it is highly likely that NVIDIA will eventually regain the heights its stock previously occupied.
Steadily rising sales and ongoing demand for the best and most powerful AI chips both heavily favor NVIDIA, and it doesn’t seem that either of these trends is in existential jeopardy. Furthermore, the stock will likely be able to advance as the company’s earnings continue to gradually increase.
What’s much less certain, however, is the short-term outlook for NVDA. With the market badly spooked by the threat of higher inflation and weaker economic growth resulting from a global trade war, high-growth stocks like NVDA may not appeal to investors enough to generate significant upward price momentum.
On a more fundamental level, the rising costs and potentially lower spending on AI development associated with the current macroeconomic environment could pressure NVIDIA’s ability to sustain its high levels of growth.
Right now, analysts are still projecting an average target price of $170 per share for NVDA over the next 12 months, a bit over the trailing 52-week high. These forecasts, however, don’t yet take into account the emerging risks that massive tariffs and a potential trade war could impose on the company.
As such, it’s likely safer to assume that NVIDIA could substantially underperform the current midpoint of analyst price projections. That said, even the lowest price target of $120 is still a good bit above where the stock is trading right now.
Overall, it seems likely that NVIDIA will regain its 52-week high, but that may not happen particularly quickly. The company is still a market-dominating business with strong long-term growth prospects.
With deep uncertainty, muted investor enthusiasm and even the growing prospect of a recession later this year, though, the stock seems unlikely to suddenly jump by more than 50 percent. This doesn’t mean, however, that NVIDIA can’t be a good investment. The business itself is still quite appealing, and it seems more likely than not that ongoing growth could allow the stock to advance from its currently depressed prices.