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Nvidia (NVDA) stock’s meteoric rise seems to have hit a roadblock. Despite delivering an exceptional Q3 performance that surpassed Wall Street’s expectations, NVDA stock has been on a downward trajectory. Since announcing its Q3 results, the stock has fallen about 12%, extending its decline to approximately 15% from its 52-week high of $152.89.
This pullback reflects Nvidia’s slightly underwhelming Q4 revenue guidance, which fell short of analysts' forecasts. Adding to investors' concerns are shrinking margins and growing apprehension about the sustainability of the artificial intelligence (AI) spending surge that has fueled Nvidia’s meteoric rise.
A slowdown in AI spending by hyperscalers could weigh on the company’s financial performance. This, coupled with rising competitive pressures from Advanced Micro Devices (AMD) and Broadcom (AVGO), has made investors cautious.
Broadcom, in particular, has seen its AI revenue soar, jumping from $3.8 billion in fiscal 2023 to a staggering $12.2 billion in 2024. The company has emphasized the growing traction of its AI products and sees robust growth opportunities ahead.
Similarly, AMD is positioning itself as a formidable competitor. During its Q3 earnings call, AMD’s leadership highlighted significant growth prospects across its Data Center, Client, and Embedded businesses, driven by the insatiable demand for compute power—a demand amplified by the rapid adoption of AI technologies.
While investor concerns about slowing AI spending and rising competition are valid, Nvidia’s dominance in AI chips and its ability to innovate and launch new products will be crucial in determining the stock’s trajectory. While Nvidia stock has cooled off a bit due to the near-term challenges, at least one Wall Street analyst expects the chip giant’s stock to reach $220, the Street-high price target. Let’s let's dive deeper into Nvidia's outlook.
Nvidia's Momentum to Continue in 2025
While concerns about a potential dip in AI spending from hyperscalers are understandable, Nvidia’s leadership in the AI chip market suggests the company will maintain its growth trajectory well into 2025.
One of the key drivers of Nvidia's growth is the soaring demand for its Hopper platform, which has witnessed massive demand. NVDA saw its sales of the NVIDIA H200 surge to double-digit billions in Q3, marking the fastest product ramp-up in its history. This platform offers an impressive performance boost and improvement in total cost of ownership, making it an attractive choice for customers looking to scale their AI capabilities.
The demand for the H200 will remain strong as Cloud Service Providers (CSPs) continue to deploy Nvidia’s H200 infrastructure and high-speed networking. These installations, which are scaling to tens of thousands of GPUs, are essential to meet the surging demand for AI training and inference workloads. Major cloud providers like Amazon's (AMZN) AWS, privately held CoreWeave, and Microsoft (MSFT) Azure offer Nvidia H200-powered cloud instances, with Alphabet's (GOOGL) Google Cloud and Oracle (ORCL) Cloud Infrastructure expected to join soon.
Nvidia GPU regional cloud revenue will likely deliver stellar growth as the company’s cloud and sovereign cloud offerings are gaining traction.
Further, consumer internet companies are increasingly relying on Nvidia’s Hopper infrastructure to power next-generation AI models and generative AI applications. With its vast capabilities, Nvidia is now the largest inference platform in the world, further solidifying its leadership position in the industry.
In addition, Nvidia’s Blackwell chip products are ramping up at an impressive pace. With demand already exceeding supply, Blackwell is poised to drive substantial growth in 2025. In Q3, Nvidia shipped 13,000 GPU samples, showcasing strong customer interest in the platform. As the supply chain catches up, Blackwell could contribute billions in revenue during Q4, helping Nvidia exceed its growth expectations.
Nvidia’s gaming and automotive revenue streams are also gaining momentum, supporting its overall growth further.
A Bright Outlook Ahead for NVDA Stock
Nvidia’s strong products, including the Hopper and Blackwell platforms, expanding customer base, leadership role in AI infrastructure, and diverse revenue streams position the company for continued growth in 2025. These factors indicate that Nvidia’s $220 price target could become a reality by 2025.
Wall Street analysts are optimistic about NVDA’s prospects, and maintain a “Strong Buy” consensus rating.
