nvidia (NVDA) 1.92%)) The unquestioned leader of the AI (AI) boom of over two years, and since its launch in 2023, its stock price has grown by more than 600%, with its market capitalization now reaching around $3 trillion.
However, recently Nvidia’s inventory has looked surprisingly deadly. The AI Chip Leader stock price has fallen by about 16% per year, with stock prices falling 8% last Thursday, earnings reports rising and solid guidance provided, but the stock price fell by 8%. The company reported $39.3 billion to 78% revenue growth in the fourth quarter, surpassing the consensus at $38.2 billion, improving earnings per share (EPS) from $0.49 to $0.89, with an estimate of $0.85. Finally, its first quarter guidance called for around $43 billion in revenue, which is better than the $420.5 billion analyst expectations.
The sale could indicate investor fatigue from Nvidia and stocks continued to slip on the next day as they got caught up in concerns about President Donald Trump’s new tariffs and some of its tips could have been illegally exported to China. The stock is currently trading at its lowest point since September 2024, down 27% from its peak a few months ago.
For investors, stock retreats present a dilemma. With many people making huge profits from Nvidia stocks, the company’s momentum is slowing down and the macroeconomic outlook appears to be cloudy, so you may wonder if sales make the most sense.
Let’s look back at the recent history of stocks and see if you can let us know where the stocks go from here.
History of Nvidia’s Volatility
The semiconductor sector tends to be cyclical and volatile, and it’s not smooth as Nvidia has become one of the most valuable companies in the world.
The chart below shows how far Nvidia has fallen from its peak since the AI boom began in 2023.
NVDA data by YCHARTS.
Looking at the data, there has only been one opportunity Nvidia has retreated so far in the past two years. The sale began in July 2024 with a broader fear of AI infrastructure investments that slows concerns that large companies like Microsoft and Alphabet spend more money on Nvidia Chips without justifying the costs of new data centers and Nvidia chips. The sale also appeared to call for an evaluation of the AI sector’s questions.
Nvidia experienced double dips during that cycle, but by October 2024 it returned to trading at its all-time high.
Zoom out to get a longer view and you’ll see a similar pattern.
NVDA data by YCHARTS.
As you can see, Nvidia shares have experienced more than 50% drawdowns twice over the past decade. The first came in 2018 after many years of stocks surged as concerns over rising interest rates, tensions with China, bubble bursts in cryptocurrency mining, and slowing global economy (such as slowing demand for semiconductors). As investors expected, Nvidia’s revenues fell for most of 2019. However, inventory has returned to its all-time high within about a year and a half of the start of that drawdown, more than doubled from the bottom.
Similarly, stocks plummeted in 2022 with a broader crash in tech inventory as revenues from cryptocurrency-related demand drained and cut back on overall revenues again. However, excitement around AI helped bring stocks back to their all-time highs in about a year and a half.
What it means for Nvidia
It is impossible to say how long Nvidia stocks’ current drawdown will last, or how far the stocks will go down.
But what we know about Nvidia is that demand for new Blackwell chips continues to outweigh supply. The company’s competitive advantage in the data center graphics processing units (GPUs) that make up the backbone of AI applications appears to be strong again this year, with all cloud computing giants spending on capital expenditures (CAPEX). Furthermore, competition for artificial general information (AGI) is expected to continue even as the global economy weakens.
For Nvidia, it’s all good news. Meanwhile, stocks have been trading along the S&P 500 since the AI boom began, as the AI boom is trading at just 25 acquisition (P/S) ratios along the S&P 500.
Nvidia will never become a low-risk stock, but inventory may recover recent losses at some point. Bouncing off past sharp drawdowns, the technical advantages and positioning in the industry are poised to bring about continuous growth. Trade at a discount and stocks look like a great purchase right now.
Suzanne Frey, an executive at Alphabet, is a member of the board of directors of Motley Fool. Jeremy Bowman holds a job at Nvidia. Motley Fool has been working and recommending Alphabet, Microsoft and Nvidia. Motley Fool recommends the following options: A $395 phone at Microsoft for January 2026 length and a $405 phone to Microsoft for January 2026 short term. Motley Fools have a disclosure policy.
