Nvidia (NASDAQ: NVDA) has been the unquestionable leader of the artificial intelligence (AI) boom of the past two-plus years with the stock up more than 600% since the start of 2023 and its market cap now hovering around $3 trillion.
However, lately, Nvidia stock has looked surprisingly mortal. Share prices of the AI chip leader trade down about 16% year to date, and the stock fell 8% last Thursday following its earnings report even as it beat estimates and offered solid guidance. The company reported 78% revenue growth in the fourth quarter to $39.3 billion, which topped the consensus at $38.2 billion, and adjusted earnings per share (EPS) improved from $0.49 to $0.89, ahead of estimates at $0.85. Finally, its Q1 guidance called for revenue of around $43 billion, better than analyst expectations of $42.05 billion.
The sell-off may indicate some investor fatigue with Nvidia, and the stock continued to slide in the ensuing days as it got caught up in the concerns about President Donald Trump’s new round of tariffs as well as concerns that some of its chips may have been illegally exported to China. The stock now trades down 27% from its peak just a few months ago and at its lowest point since September 2024.
For investors, the stock’s retreat presents a dilemma. Many are sitting on large gains from Nvidia stock and might be wondering if selling makes the most sense as the company’s momentum seems to be slowing and the macroeconomic outlook is getting cloudier.
Let’s look back at the stock’s recent history to see if it can inform where the stock will go from here.
The semiconductor sector tends to be cyclical and volatile, and Nvidia’s rise to become one of the most valuable companies in the world hasn’t come smoothly.
The chart below shows how far Nvidia has fallen from its peak since the AI boom began in 2023.
Looking at the data, there has been only one other occasion in the last two years where Nvidia pulled back as far as it has now. That sell-off began in July 2024 on broader fears about AI infrastructure investment slowing over concerns that big cloud computing companies like Microsoft and Alphabet were overspending on new data centers and Nvidia chips without seeing meaningful returns to justify the expense. The sell-off also seemed to call into question valuations in the AI sector.
While Nvidia did experience a double dip during that cycle, it was back to trading at all-time highs by October 2024, just a few months after it started.
If we zoom out and take a longer view, we see a similar pattern.
