What a year it has been for chip company Nvidia (NASDAQ: NVDA)! Its stock had already performed superbly in recent years. So far in 2025, it is up by 31%. That means that, over five years, the Nvidia stock price has soared by 1,228%.
Wow!
That sort of return has no doubt made many existing shareholders very happy. But might there still be sense in me buying some shares now in the hope of future gains?
Lots left to like
I am pretty upbeat about the outlook for the company.
The recent buzz about Nvidia has understandably focused on how AI has seen customer demand boom. But Nvidia was already a highly successful, well-established company before AI fever took hold.
Even ignoring the AI angle, I see a lot to like about Nvidia, including its proprietary technology, installed customer base and deep industry relationships.
But AI has been transformational for Nvidia, explaining why the company’s stock price has soared in recent years.
AI could be just getting going
How one feels about the current valuation for Nvidia therefore likely depends to a significant extent on how one feel about the prospects for AI.
If AI keeps driving up demand for chips, that could mean bigger revenues and profits for the chip giant. Currently, the stock sells for 44 times earnings.
That is too high for my tastes, though I understand why some investors would feel a high-growth tech company may deserve a price premium.
That could make sense. Indeed it explains why I think Nvidia stock may move higher still. If AI-related demand keeps growing, earnings could also increase. That could boost the share.
However, there is a risk that the wave of AI-related chip demand that has helped fuel the share lately could suddenly end. Maybe companies that have spent heavily gearing up for AI decide that the economics are unattractive – and future spending is much smaller.
That might see Nvidia’s profits fall sharply, in which case I think the share price could of the world’s most valuable listed company come crashing down to earth.
Looking ahead to 2026
For now, nobody knows what will happen next.
If AI demand remains buoyant, I could see a scenario where Nvidia stock keeps moving upwards.
But if the AI boom loses momentum, that could hit some shares hard – and I would expect Nvidia to be among those that suffered.
If I felt that the current stock price offered me sufficient margin of safety, I would take that risk in my stride. After all, I see Nvidia as a proven, high-quality company with appealing long-term prospects.
But at the current price, I do not like the risk profile.
So, for now at least, I will not be investing. But I will keep a close eye on the stock in the coming year, in case any price fall offers me what I regard as a potentially attractive buying opportunity.
