Will Nvidia Stock Bounce Back? Watch Out for These Risks and Opportunities

While Nvidia (NVDA) has come off its all-time highs, the stock is up over 119% for the year, which makes it the best performer in the S&P 500 Index ($SPX). NVDA stock has largely moved sideways in narrow price bands since peaking in June, even as those moves have been quite volatile, in a typical Nvidia way. In this article, we’ll look at the risks and opportunities that the Jensen Huang-led company faces, and analyze whether the stock can bounce back to its all-time highs.

One of the biggest challenges that Nvidia faces – which was well-illustrated by its recent earnings release – is carrying extremely high expectations on its shoulders. The semiconductor designer posted better-than-expected earnings for fiscal Q2 2025, and its guidance was ahead of Wall Street's estimates, but the shares plunged after the report as markets were expecting an even bigger beat.

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It becomes a challenge to beat such sky-high expectations, especially when a company reaches critical mass, like NVDA has in the artificial intelligence (AI) chip market. Nvidia is expected to report revenues of over $125 billion this year, and for companies of that size, beats of the massive scale that Nvidia delivered last year start to grow few and far between. 

Key Risks That Nvidia Investors Should Watch Out For

Here are some of the risks that Nvidia investors should watch out for:

• Revenue concentration: In fiscal Q2 2025, the top four customers accounted for nearly half of Nvidia’s revenues. Adding to the concern, many of these so-called “hyperscalers” are working on their own custom AI chips.
• A severe slowdown or a recession: While the likelihood looks low, a severe slowdown or recession could put the brakes on the aggressive AI spending by tech majors, which would lead to lower demand for Nvidia’s AI chips. We saw how aggressively tech giants like Amazon (AMZN), Alphabet (GOOG), and Meta Platforms (META) tightened their belts between 2022 and 2023 as investors pressured them to cut costs. With little fat available to trim elsewhere, the axe might fall on their AI capex next if these giants are pressured to cut cash outflows again.
• Chip breakthrough: Nvidia has had a joyride in the AI chip space, and controls most of the market. However, a chip breakthrough – either by a U.S. or a Chinese company – is a potent risk for Nvidia. Competition in the AI chip space could hurt not only Nvidia’s top line, but also the over 70% gross margins that it is making on the back of strong pricing in the absence of credible competition.
• Antitrust concerns: While Nvidia denied receiving a subpoena from the Justice Department, the company’s lead in the AI chip space has attracted the attention of U.S. regulators – who have of late been quite aggressive about antitrust issues, with Google especially feeling the heat.
• Geopolitical risks: Nvidia faces heightened geopolitical risks, and the prospect of Donald Trump returning to the White House could be a particularly potent threat, given the former president's tough stance on China, which is a major market for Nvidia.

The Demand for NVDA’s AI Chips Is Broadening 

However, it's not all gloom and doom for Nvidia, and the company has several key opportunities ahead. 

During the fiscal Q2 earnings call, Huang was quite upbeat about the data center opportunity, and stressed that graphics processing units (GPUs) will replace central processing units (CPUs) across data centers. The company has also dispelled fears over its customers not making adequate returns on their investment in Nvidia's AI chips. 

“The people who are investing in Nvidia infrastructure are getting returns on it right away,” said Huang during the fiscal Q2 earnings call.

Also, AI capex is now moving beyond the initial adopters. Goldman Sachs semiconductor analyst Toshiya Hari recently wrote, “You are seeing a broadening in the demand portfolio into enterprise, even into sovereign states.” 

Finally, along with AI, Nvidia is a play on several other high-growth themes, like gaming, the metaverse, blockchain, and autonomous driving – though for now, sales of AI chips overshadow all of them.

Will Nvidia Stock Rebound?

Wall Street analysts expect Nvidia stock to rebound from these levels; its mean target price of $149.22 is 38% higher than yesterday’s closing prices. NVDA's Street-high target price of $200 is an 85% premium, and the stock has been rated as a “Strong Buy” by analysts.

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Analysts expect Nvidia to report adjusted EPS of almost $4 in the next fiscal year ending in January. Looking at the current stock price, it implies a FY 2026 price-to-earnings (P/E) multiple of 27x, which sounds mouthwatering considering the over 40% earnings growth that the company is expected to report in the next fiscal year – on the back of 120% growth this year.

While a quality tech name like Nvidia trading at a PE-to-growth (PEG) ratio of less than 1 is quite tempting, markets are wary about its ability to keep selling loads of AI chips at fat margins beyond 2026, as hyperscalers eventually cut their capex.

That said, while I don’t expect Nvidia to roughly double every few months, as it has done since early 2023, the stock should rebound from these levels, even if that recovery might be gradual.

While Nvidia’s recent price action has been subdued, I actually see that as a good sign, as the company is now behaving like a “normal” stock, and is shedding the baggage of carrying the entire AI rally on its shoulders – no matter how broad those shoulders might be. Investors should also temper their expectations and expect more normalized returns from NVDA stock going forward.

On the date of publication, Mohit Oberoi had a position in: NVDA , AMZN , GOOG , META . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.