Nvidia Stock Has Taken a Beating. Buy the Dip?

Core Viewpoint - Despite strong business growth, Nvidia's shares may not present an attractive risk-reward trade-off at current prices [1][11] Company Performance - Nvidia's revenue for the fourth quarter of fiscal 2025 surged 78% year over year, reaching $35.1 billion, while total fiscal-year revenue increased by 114% to $130.5 billion [3] - Net income for the fourth quarter jumped 82% year over year to $22.09 billion, translating to earnings of $0.89 per share [4] Valuation Concerns - Nvidia's stock is priced at about 40 times earnings, which may not seem expensive given recent growth, but underlying risks suggest a need for a lower valuation [5] - The year-over-year revenue growth rate of 78% in the fourth quarter has decelerated from 94% in the previous quarter and 265% a year ago [6] - Gross profit margin contracted from 76% in the year-ago period to 73%, indicating potential pressure from rising costs and increased competition [7] Market Dynamics - The current demand for AI chips is outpacing supply, allowing Nvidia to maintain dominance, but this situation may not be sustainable as competition increases [10] - If revenue growth continues to decelerate and margins contract, the current valuation multiple could appear even more stretched [9] Investment Strategy - Given the uncertainties and potential for slowing growth, it may be prudent for investors to wait for a more favorable entry point or consider alternatives with more reasonable valuations [11]