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Nvidia (NVDA) has underperformed in 2025, with its stock declining by 15.8% in the last three months. This downturn in NVDA stock can be attributed to several factors impacting market sentiment.
Earlier in the year, attention turned to DeepSeek, a Chinese startup that made headlines with the launch of its large language model (LLM) developed at a significantly lower cost. The achievement raised worries that demand for Nvidia’s high-end GPUs, which are deemed essential for building powerful artificial intelligence (AI) systems, could slow down.
Adding to the pressure, broader economic uncertainty weighed on the stock. More recently, Nvidia disclosed in an SEC filing that new U.S. export restrictions are targeting its H20 chip. The U.S. government now requires companies to obtain licenses for shipments of H20 chips to China. This regulatory change will result in a $5.5 billion charge for the company. Moreover, it raises concerns over the future growth trajectory of Nvidia in China, where it generated over $17 billion in revenues in fiscal 2025.
While Nvidia faces headwinds, its recent stock pullback has lowered its valuation. Despite uncertainties, the company is still well-positioned for long-term growth. With demand for AI infrastructure continuing to expand, NVDA stock could be poised for a strong rebound.
Nvidia to Deliver Solid Growth
Nvidia looks well-positioned to deliver solid growth in the quarters ahead, even as it navigates some short-term headwinds. The company’s data center business, a key catalyst behind its success, continues to show impressive momentum. In FY25, Nvidia’s data center revenue soared to $115.2 billion, more than doubling from the previous year. The fourth quarter saw a record $35.6 billion in data center revenue, up 16% sequentially and 93% year-over-year, driven by the early ramp of its Blackwell architecture and continued growth from Hopper 200.
Management highlighted that Blackwell’s sales exceeded expectations in Q4, generating $11 billion in revenue as customer demand surged. Nvidia is scaling up Blackwell production across various configurations, quickly ramping up supply as adoption accelerates. Blackwell’s architecture is specifically designed for reasoning AI, delivering significant throughput and drastically cutting costs compared to Hopper 100. These trends show solid demand for Nvidia’s AI infrastructure as companies customize and deploy models tailored to specific domains.
Revenue from its networking division, particularly its Spectrum-X and NVLink Switch products, rose during the fourth quarter, signaling the beginning of what management believes could be a powerful new growth engine. Nvidia expects the networking business to return to growth in Q1.
AI is reshaping the demands of networking infrastructure, and Nvidia is well-positioned to meet those demands. The company’s NVLink Switch systems are designed to scale up computing power within AI systems. Meanwhile, it offers solutions like Quantum for high-performance computing (HPC) and Spectrum-X for Ethernet environments.
Adding to the positives, Cisco (CSCO) announced it would integrate Spectrum-X into its networking portfolio. With Cisco’s large footprint and strong presence across enterprises, this partnership could make Nvidia’s Ethernet solutions a staple across industries, cementing Nvidia’s competitive position in the AI and networking revolution.
Looking ahead, Nvidia expects sequential growth in both its Data Center and Gaming segments, projecting revenue of $43 billion for the first quarter of FY26 compared to $26 billion in Q1 of FY25. New AI trends, including agentic AI for enterprise use, physical AI in robotics, and sovereign AI for regional ecosystems, are set to drive further demand for Nvidia’s GPUs and services.
Nvidia’s automotive business is also gaining traction. The company anticipates its automotive revenue to grow to around $5 billion in FY26 as industries increasingly use Nvidia’s technologies for autonomous vehicles, robotics, and smart factories.
Nvidia Stock: A Compelling Investment Opportunity
Valuation-wise, Nvidia stock trades at a forward price-earnings (P/E) ratio of about 27.65x, a reasonable multiple given the company’s projected earnings per share (EPS) growth of 36.9% in FY26 and 24.7% in FY27.
Wall Street remains bullish, with a consensus “Strong Buy” rating on NVDA stock. The average price target of $167.80 suggests potential upside of roughly 56% from current levels.
With strong momentum, innovative leadership in AI, and favorable growth trends, Nvidia stock remains one of the most promising investment stories. Moreover, its low valuation makes it cheap enough to buy now.
