Nvidia's Stock Hasn't Been This Cheap in Over a Year. Here's What History Suggests Will Happen Next.

Core Viewpoint - Nvidia has become a central player in the AI industry, with its GPUs and CUDA platform being essential for generative AI development, raising questions about its ability to maintain momentum in 2026 [1][2]. Group 1: Company Performance and Market Dynamics - Nvidia's stock has surged approximately 1,000% since the onset of the AI revolution, making it the most valuable company globally [2]. - The company faced significant challenges in early 2025, particularly from competition posed by the Chinese start-up DeepSeek, which launched a chatbot rivaling established models like ChatGPT [3][4]. - Following the emergence of DeepSeek and the announcement of new tariffs by President Trump, Nvidia's stock experienced a 19% decline from January to April 2025, resulting in a loss of over $1 trillion in market value [6]. Group 2: Earnings and Valuation Metrics - Nvidia's forward price-to-earnings (P/E) ratio has fluctuated, with the current ratio at 24.2, reflecting a compression in earnings multiples due to market fears and competition [9][12]. - The decline in Nvidia's earnings multiples suggests a market perception shift from a high-growth technology company to a more stable, utility-like business model [14]. Group 3: Competitive Landscape and Future Outlook - Rising competition from companies like Advanced Micro Devices and major tech firms designing custom chips poses a threat to Nvidia's market dominance in AI accelerators [11]. - Despite competitive pressures, Nvidia has established multiyear partnerships across various sectors, positioning itself as a key provider in the AI infrastructure space [15][16]. - As these partnerships mature, Nvidia is expected to regain pricing power, leading to margin expansion and earnings growth, which could enhance its valuation through the rest of the decade [17].