Nvidia Is 23% Below Its Record-Closing High: 6 Reasons I'm Still Not a Buyer

Core Viewpoint - Nvidia's stock has experienced a significant decline of 23% from its record high, raising concerns about its future growth potential and competitive position in the AI market [2][4]. Group 1: Market Performance - The S&P 500 index has entered correction territory, with a decline of at least 10% from recent highs, and the Nasdaq Composite has fallen even faster [1]. - Nvidia's stock is currently 23% below its record-closing high of $149.43, achieved on January 6 [2]. Group 2: Competitive Landscape - Internal competition is increasing as Nvidia's top customers are developing their own AI chips, which are cheaper and not backlogged, posing a threat to Nvidia's market share [5][6]. - Nvidia's GPUs, while superior in speed, may lose data center real estate to these internally developed chips in the coming quarters [7]. Group 3: Financial Metrics - Nvidia's gross margin has declined from over 78$17 billion in annual revenue, which accounted for 13% of Nvidia's total sales in fiscal 2025 [12][14]. - Tariffs imposed by the current administration could increase infrastructure costs for AI-accelerated data centers and impact Nvidia's sales [15][16]. Group 5: Historical Context - Historical trends suggest that new technologies often experience bubble-bursting events, and while AI is seen as transformative, it is not yet a mature trend, with many businesses lacking a clear strategy for ROI on AI investments [18][19]. - If an AI bubble were to burst, Nvidia could be significantly affected, as over 88% of its sales in fiscal 2025 came from its data center segment [20]. Group 6: Valuation Concerns - Nvidia's stock is currently valued at 20 times forward-year earnings per share, which is in line with the S&P 500 but still has a high price-to-sales ratio of 22, suggesting potential for further valuation decline [22][23].