Nvidia Is Down 27% From Its Peak. History Says This Is What Happens Next.

Core Viewpoint - Nvidia has been a dominant player in the AI sector, with its stock increasing over 600% since the beginning of 2023, reaching a market cap of approximately $3 trillion [1] Financial Performance - Nvidia reported a 78% revenue growth in Q4, totaling $39.3 billion, surpassing the consensus estimate of $38.2 billion [2] - Adjusted earnings per share (EPS) improved from $0.49 to $0.89, exceeding estimates of $0.85 [2] - The Q1 guidance projects revenue around $43 billion, better than analyst expectations of $42.05 billion [2] Stock Performance and Market Sentiment - Despite strong earnings, Nvidia's stock has declined about 16% year-to-date and fell 8% after the earnings report [2] - The stock has dropped 27% from its peak a few months ago, marking its lowest point since September 2024 [3] - Investor fatigue may be influencing the stock's recent sell-off, compounded by concerns over tariffs and potential illegal exports to China [3] Historical Context - Nvidia's stock has experienced significant volatility, with notable drawdowns of 50% or more occurring in 2018 and 2022 [8][9] - The stock rebounded to all-time highs within approximately 18 months after both previous drawdowns, indicating a potential for recovery [8][9] Industry Dynamics - Demand for Nvidia's new Blackwell chips continues to exceed supply, reinforcing its competitive advantage in data center GPUs essential for AI applications [11] - Cloud computing companies are increasing capital expenditures, which bodes well for Nvidia's growth prospects [11] - The pursuit of artificial general intelligence (AGI) is expected to persist, even amid a weakening global economy [11] Valuation and Investment Outlook - Nvidia's stock is currently trading at a forward price-to-earnings (P/E) ratio of 25, aligning with the S&P 500, despite its faster growth rate [12] - The stock is viewed as a potential buying opportunity due to its recent decline and historical resilience [13]