Why Nvidia Stock Can Drop 30%?

Core Viewpoint - NVIDIA has a history of significant stock declines, with drops exceeding 30% occurring multiple times, indicating vulnerability to abrupt market corrections [1][7]. Financial Performance - NVIDIA achieved a market cap of $1 trillion and is forecasting second quarter sales of $11 billion, which is 50% higher than analyst estimates of $7.15 billion [3]. - Revenue growth is reported at 65.2% for the last twelve months (LTM) and 91.6% for the last three-year average [11]. - The company has a free cash flow margin of nearly 41.3% and an operating margin of 58.8% LTM [11]. - NVIDIA's stock trades at a P/E multiple of 43.7 [11]. Risks Identified - Bloating Accounts Receivable and Channel Saturation: Accounts Receivable rose to $33.39 billion, a 45% increase since the beginning of the fiscal year, with Days Sales Outstanding (DSO) increasing to 53.5 days from a historical average of 46 days [10]. - Hyperscaler Bargaining Power and In-House Competition: Major cloud service providers are developing custom AI accelerators to reduce dependence on NVIDIA, which may lead to gross margin compression and P/E multiple contraction [10]. - China Antitrust Investigation Escalation: NVIDIA is under investigation by China's State Administration for Market Regulation for failing to comply with merger remedies, which could result in substantial fines and operational changes affecting its business structure [10].