Is it game over for Nvidia stock?

Our writer wonders whether Nvidia stock may be doomed or whether now might be an opportune time to invest in the AI chip master.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young Black woman looking concerned while in front of her laptop

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Nvidia (NASDAQ: NVDA) has been the best-performing stock over the past two decades. In late 2022, it got a major shot in the arm when ChatGPT was released, triggering a tsunami of capital expenditure on artificial intelligence (AI) infrastructure by cloud giants like Amazon Web Services, Microsoft‘s Azure, and Google Cloud.

Put simply, they feared being left behind in the age of AI unless they whipped out their fat chequebooks and bought as many top-shelf Nvidia GPUs as they could get their hands on. This has seen GPU king Nvidia’s revenue surge from $27bn in FY23 to an expected $196bn in FY26 (starting in February)!

The widespread assumption has been that this AI expenditure would reach trillions of dollars by the 2030s. Until recently, that is, when little-known Chinese firm DeepSeek came along with a competitive open-source AI model that was reportedly trained on a shoestring $6m budget. 

Should you invest £1,000 in Associated British Foods right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Associated British Foods made the list?

See the 6 stocks

This has raised serious doubts about AI models requiring ever-increasing amounts of computing power to train and run. Yet this is a big part of Nvidia’s bull story.

So, is it game over for the stock? Here’s my take.

Created with Highcharts 11.4.3Nvidia PriceZoom1M3M6MYTD1Y5Y10YALL31 Jan 202031 Jan 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '2520212021202220222023202320242024www.fool.co.uk

Uncertainty

What I’ve found fascinating about the recent DeepSeek bombshell is how it has further entrenched investor’s already-formed views on Nvidia and the AI revolution. I believe psychologists call this ‘confirmation bias’.

In other words, Nvidia optimists simply see DeepSeek as yet another bullish signal. Cheaper models will lead to quicker widespread AI adoption, driving even more demand for data centres packed with Nvidia’s GPUs. They have a name for this: Jevons Paradox. This is the idea that as the cost of using a resource falls, demand will rise, not drop. 

For Nvidia bears though, DeepSeek is the red-hot pin that is ready to pop the AI bubble, bringing Nvidia’s share price crashing back down to earth.

Where do I stand? Well, all this has just further increased my uncertainty. This is why I reluctantly sold my long-held Nvidia position last year.

I have four basic worries. First, it took less than two years for Nvidia to become a $3trn+ company. To sustain such a valuation, it will one day need to regularly generate hundreds of billions in annual profit. But it’s not at all clear to me that AI investments will always be anywhere near this high.

Second, there’s China, where Nvidia makes around 15% of revenue. I think there will be increasing restrictions on Nvidia’s GPU workarounds for Chinese customers. Indeed, after DeepSeek, I wouldn’t rule out an outright ban.

Third, AI basically falls into two categories: training and inference (e.g., ChatGPT answering a question). As models evolve, demand may shift more toward inference.

Will that reduce demand for GPUs? Does Nvidia still have the same competitive edge there? I don’t know. Perhaps Meta Platforms, Microsoft, and the rest can compete more easily in this area.

Game over?

That said, I don’t think it’s game over for Nvidia stock. Investors can essentially gauge near-term GPU demand by listening to the major cloud providers. And Microsoft has just earmarked $80bn for annual AI spend, while Meta is planning as much as $65bn in 2025. These are figures representing around 30% of annual revenue!

More near-term growth seems certain for Nvidia then. Longer term though, I’m still uncertain, so not tempted to reinvest.

Should you buy Associated British Foods now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »