AI King. Hi everyone. Nvidia now stands alone above everyone else.
On Wednesday, the chip maker became the first company ever to top $4 trillion in market value. Nvidia shares are up 22% this year.
Since Barron's recommended Nvidia in a cover story in December 2023, the share price has more than tripled. Despite the breathtaking run, the king of the artificial intelligence trade—and its stock—may have more room to run.
The rally hasn't been a straight line. There have been multiple double-digit drawdowns along the way, including a 40% decline this year alone. The market has often been swayed by fear, uncertainty, and doubt. And plenty of investors have been scared out of the stock.
In looking toward the future, it's helpful to examine the long list of worries that triggered selloffs over the last two years—and that Nvidia was able to overcome.
In 2024, Wall Street worried about a pause in sales as Nvidia transitioned to its next product line. The theory was buyers would digest their prior purchases of Hopper GPUs and wait for the higher-performing next-generation Blackwell models, depressing demand as production for the newer GPU ramped. But no such shortfalls occurred. The sales of Hopper led right into sales of Blackwell.
There have also been ongoing worries about cloud giants like Amazon Web Services and Microsoft Azure reducing their budgets for AI infrastructure. But time and again the opposite has happened: The large technology companies have increased their capital expenditure forecasts, while emphasizing that demand for AI was outstripping capacity.
Then there were the concerns about rising competition from Broadcom and other rivals, even though the threat from custom AI chips wasn't a new story. Amazon Web Services launched its own AI chip in 2019, and Alphabet's Google introduced its AI accelerator back in 2015. Both tech firms have launched several versions since, but Nvidia still gets most of the AI chip business because of its unique combination across hardware and software. Incredibly, Nvidia grew faster than Broadcom's AI chip business in the most recent quarter, despite being multiple times its size.
Worries about government regulation, from tariffs to China export controls, have also caused selloffs. In the most recent quarter, Nvidia managed to grow sales and thrive despite an effective ban on its H20 chips that cost the chip maker more than $10 billion in revenue this year.
Meanwhile, as the market grew anxious about the impact from low-cost AI models like China's DeepSeek, the advent of the more powerful reasoning models from OpenAI were leading to an exponential increase in demand for AI. Reasoning consumes 100 times more computing resources compared with previous AI models, according to Nvidia CEO Jensen Huang, which means significantly more demand for the company's AI chips.
Each of these worries led to short-term volatility. Each time, Nvidia stock eventually hit new heights. The lesson is successful investing requires long-term thinking. It requires patience and fortitude to cut through the noise and focus on the hard facts and true fundamentals.
For Nvidia stock, the bull case remains intact. Nvidia remains the most important supplier for AI and is at the center of the multi-year AI infrastructure buildout. The growth story isn't over.
Revenue for Nvidia's latest quarter was up 69% year-over-year to $44.1 billion, ahead of expectations. Nvidia's data-center business, primarily driven by AI chip demand, grew faster, up 73%, to $39.1 billion.
If Nvidia continues to deliver strong growth, the stock will rise over time.
Of course, there will be more drawdowns and bumps ahead whether from geopolitics, new semiconductor or computer tariffs, or maybe an actual product transition issue. Holding through volatility is never easy.
For now, though, holding on is the right move. We'll let you know when and if that changes.
Write to me at tae.kim@barrons.com or follow me on X at @firstadopter.
