About three decades ago, the advent of the Internet and its traditional proliferation began to change the business world forever. Although this transformation did not occur overnight, investors waited for a certain time for the next innovation that changes the situation comes and strengthens the long -term growth prospects of the American company. After a long wait, Artificial Intelligence (AI) seems to have answered the call.
Software and systems are empowered by AI to make decisions, reasons and developments, all without the help of human intervention. With use cases in most industries around the world, it may not be surprising that PWC analysts provide for a $ 15.7 Billions of dollars benefit from the world’s world economy by 2030.
No public enterprise took the bull by the horns more during the first stages of the AI revolution Nvidia(Nasdaq: NVDA). The company’s graphic processing units (H100) and the Blackwell graphic processing units (GPU) quickly became the standard for corporate data centers with strong understanding of the formation of important language models and the ‘Execution of generators’ solutions.
But with high growth expectations already cooked in market capitalization of nearly 3.2 billions of dollars from Nvidia, there are three very specific reasons to believe that Nvidia’s shares are about to relax after the publication of His exercise for the 2025 financial year in the fourth quarter of the results after the closing bell on February 26.
Image source: Getty Images.
To give a credit where the credit is due, no flea company is particularly close to the correspondence of the calculation speed of the Blackwell chip successor to Nvidia, or even to overthrow the Hopper GPU at this stage.
However, the company also benefited immensely AI-GPU rarity. An overwhelming request for NVIDIA equipment, associated with a limited offer, helped it to book orders well in advance, as well as invoice a premium price for its AI GPU. While Advanced micro-apparents was in the process of $ 10,000 to $ 15,000 for its AI-A-ACCECELANT CHIPS instinct at the start of 2024, NVIDIA commanded up to $ 40,000 for its hopper chip. The result was a gross margin which culminated at 78.4% in the first quarter of the year 2025.
The concern for Nvidia on and after February 26 is that the calculation speed is not all in the AI space. He is dominated because he was able to provide equipment companies on demand. But as A-GPU rarity decreases, the pricing power of the company and its supercharged gross margin will also be.
While most investors have focused on direct competitors, such as DMLA, the biggest threat is the possibility of losing precious real estate in the data center of its best customers by net sales. Most members of the “Magnificent Seven” are developing their own internal AI chips. Even if these GPUs are unlikely to go beyond the potential for calculating Hopper and / or Blackwell fleas from Nvidia, they are considerably cheaper and not behind. This is a recipe for future NVIDIA equipment orders from the most influential companies in America to disappoint.
We have already seen the retreat of the gross margin of Nvidia of 380 base points compared to its summit of 78.4% compared to the previous two quarters. Do not be surprised if a growing internal and external competition, as well as the AI-GPU percussion shortage, weigh on the gross margin of Nvidia and its stock.
Image source: Getty Images.
If there is one thing that Wall Street tends to reward, whatever the evaluation, it is a predictability. Unfortunately, various uncertainties concerning prices and export limitations can lead to the prospect of Nvidia containing more unknown than usual.
During his stay on the campaign track, the candidate of the time Donald Trump was to come on his desire to use prices if it was elected to promote American interests. The idea behind prices is that imposing them on certain imports can help national manufacturers be more competitive on the price. Last week, Trump instituted a 10% tariff on certain goods from China.
However, an analysis published by December by Liberty Street Economic The companies that had no exhibitions. These sub-performative companies have also seen their profits, employment, sales and labor productivity from 2019 to 2021 on average.
Although NVIDIA anywhere from China products, the world economy No. 2 is one of its largest equipment buyers. Tented trade relations between the United States and China could compromise billions of dollars in quarterly sales for Nvidia.
To worsen things, the Biden administration has restricted the export of NVIDIA’s high power chips in China for three consecutive years (2022 to 2024). Although President Trump and former President Joe Biden do not see each other much, the protection of AI interests is one of these rare shared points. It is unlikely that Trump or his administration will serve the regulations surrounding the exports from A-GPU to China.
These limitations are likely to be reflected in the prospects of Nvidia and can lead to prudent comments from its management team.
The third very specific reason why Nvidia’s actions can relax after reporting its 2025 exercise operating results on February 26 is a previous history. History has impeccable history regarding Next-Big innovations, and this is bad news for the face of the movement of artificial intelligence.
One of the most common concerns for NVIDIA is that each technological innovation that changes the situation for three decades, including the Internet, has sailed through a bubble event. Bubbles are formed because investors have a terrible habit of overestimating the speed with which new technology will be adopted and / or wins a general public utility. Although there are many use cases, on paper, for AI, most companies lack well -defined plans to optimize technology and significantly improve their sales and profits.
If there is a silver lining for NVIDIA, it is the well -established commercial segments of the company that predates the AI revolution. If the bubble of the proverbial AI should break out, Nvidia’s actions would be partially supported by GPU demand for games and cryptocurrency extraction, as well as the request for virtualization software.
The other historic battle Nvidia will fight against its expensive evaluation. In June-July 2024, Nvidia’s actions exceeded a price / sales ratio (P / S) of 40, which has always been a level that reported a summit for other advanced companies of nearby innovations. Even if Nvidia fell back its P / S ratio last summer, its stock remains expensive – in particular given the list of challenges described above.
Even if each Wall Street analyst expects Nvidia’s actions to join in 2025, the table seems to be defined to underline.
Before buying actions in Nvidia, consider this:
THE Motley Fool Stock Advisor The team of analysts has just identified what they believe 10 Best Actions So that investors are buying now … and Nvidia was not part of it. The 10 actions that cut could produce monster yields in the coming years.
Inquire Nvidia Make this list on April 15, 2005 … if you have invested $ 1,000 at the time of our recommendation, You would have $ 795,728! *
Now it’s worth notingStock advisorTotal average yield is926% – advanced market outperformance compared to175%For the S&P 500. Do not miss the last list of the best 10.
Sean Williams Has no position in the actions mentioned. The Motley Fool has positions and recommends micro advanced devices and Nvidia. The Word’s madman has a Disclosure policy.
