Nvidia's (NVDA.O) stock price fell into a correction range on Monday, failing to emerge from its recent sluggish state. The stock price dropped by 1.7% to close at $132, down 11% from the highest closing price of $148.88 reached on November 7.
Despite this, Nvidia's overall performance this year remains impressive, with the stock price increasing by nearly 170% in 2024. In June this year, Nvidia even briefly surpassed Apple and Microsoft to become the most valuable publicly traded company in the world. However, the market is weighing the challenges facing the sales of Nvidia's artificial intelligence (AI) processors.
In the past month, Nvidia's stock price has mostly been in a consolidation phase, with the market still waiting for a clear signal regarding the acceleration of sales for its Blackwell artificial intelligence chips. Although the company is expected to continue dominating the AI processor market for the foreseeable future, it also faces some geopolitical resistance.
According to sources cited by the Wall Street Journal last Friday, the U.S. is preparing to issue regulations to restrict the sale of high-end AI chips to regions such as Southeast Asia and the Middle East, in order to curb China's access to computing power through other countries.
Another challenge faced by Nvidia is the high expectations set by its astonishing growth over the past two years. According to consensus forecasts from analysts surveyed by FactSet, Nvidia's revenue for fiscal year 2025 is expected to grow by 55% to $191.45 billion, while revenue for fiscal year 2024 is expected to double year-on-year to $123.37 billion.
However, the slowdown in revenue growth does not fully reflect Nvidia's performance. The adjusted earnings per share (EPS) is expected to significantly increase to $4.20 in 2025, up from $2.72 in 2024.
In addition, some investors may have turned to other stocks with more attractive short-term returns due to waiting too long. Among other chip manufacturers, Broadcom's (AVGO.O) stock price rose by 11% on Monday, continuing the momentum from a 24% surge after last Friday's earnings report, mainly driven by the potential for custom AI chips.
Bank of America Securities analyst Vivek Arya pointed out in a research report on Monday: "The uncertainty surrounding the delivery of Nvidia's Blackwell chips, the sluggish recovery in the industrial and automotive sectors, and concerns over restrictions on China are putting pressure on semiconductor stocks... Meanwhile, investors are turning their attention to tech software stocks that are not affected by China and benefit from AI."
Nevertheless, Arya still lists Nvidia as a "preferred stock" in the semiconductor industry for 2025, believing that the deployment of Blackwell chips by U.S. customers will further boost the AI chip market.
Article reposted from: Jin Shi Data
