Nvidia has faced a rocky road this year as the artificial intelligence powerhouse navigates a trade war, heightened competition and looming questions about AI's direction. There's an emerging view on Wall Street that most of these obstacles are in the rearview mirror, which should help Nvidia stock. But Nvidia is still bracing for more potholes, even as investors hope for a smoother ride starting this summer.
"This is a very volatile tape and a very volatile macro situation, riddled with tariffs and a lot of uncertainty," Piper Sandler analyst Harsh Kumar told Investor's Business Daily. "Nvidia is at the cross center of this whole AI debate, because it is the AI king."
Nvidia Stock: Spotlight On AI ROI
That debate revolves around whether tech giants and other customers will get a return on investment for the many billions they've sunk into AI data centers, he said.
"There is still a debate on the ROI for generative AI," Kumar said. While hyperscale cloud service providers are bullish on the technology, investors are more skeptical, he said.
Nvidia stock started the year on top of the world, reaching a record high of 153.13 on Jan. 7. But then it got knocked down by a series of investor worries. They included China's DeepSeek AI model that supposedly required less advanced processors to build.
Investors also fretted about the sustainability of AI data center demand from hyperscalers after two years of heavy investment sparked by the launch of OpenAI's ChatGPT in November 2022.
Liberation Day Gut Punch
President Donald Trump's Liberation Day tariffs on April 2 shook the stock market broadly. It was a gut punch that sent Nvidia stock falling to its lowest level since May 2024.
Then, in mid-April, the Trump administration effectively barred Nvidia and rival AMD from selling even their throttled AI chips to China on security concerns.
However, the Trump administration removed one overhang on Nvidia stock when it ended the Biden-era AI Diffusion Rule. Critics called that rule overly complicated and burdensome. It divided countries into three classes and limited the quantities of AI chips that could be sold to some countries that previously had no restrictions.
Nvidia stock perked up in late April as hyperscalers such as Alphabet's Google, Amazon, Meta Platforms and Microsoft provided robust guidance on data center capital expenditures.
"That was exactly what the doctor ordered for the health of Nvidia," Kumar said. Nvidia stock rose on the news.
Spotlight On Hypserscalers
In aggregate, U.S. hyperscalers are forecast to spend $368 billion in capex in 2025, up 47% from last year, Evercore ISI said in a report. And they're on pace to spend about $400 billion next year, the firm said.
On May 13, Nvidia stock surged anew after it announced a multibillion-dollar deal to supply AI chips for a new artificial intelligence company in Saudi Arabia called Humain. Nvidia also is expected to score big business from new sovereign AI data centers in France, Taiwan and the United Arab Emirates.
All of this is just a warmup for Nvidia's fiscal first-quarter report due out late on May 28.
Nvidia Stock: Sentiment Shifts
"The pace of sentiment shifts (for Nvidia stock) is pretty remarkable," Wells Fargo Securities analyst Aaron Rakers told IBD. "We've climbed a pretty significant wall of worry after DeepSeek."
Data points from original equipment manufacturers Foxconn, Quanta and Wistron have been positive for AI server sales, he said. The same goes for computer exports from Mexico to the U.S., Rakers said.
One investor concern now is rumored production snags with Nvidia's latest Blackwell processors, GB200 and GB300.
However, Rakers called those rumors "noise." Nvidia has been able to find technical fixes for thermal issues and other problems with its new products, he said.
As for demand for Nvidia AI processors, indications are that it remains strong.
"The demand is off the charts," Bernstein analyst Stacy Rasgon told IBD. "They're going to sell everything that they can get out the door."
Solid Demand
And even if the next Nvidia AI processor is delayed, customers will still buy it when it becomes available, Rasgon said.
"It's not like you're shipping PCs and if you miss the back-to-school season, you're screwed," he said.
When the Trump administration blocked sales of Nvidia's custom H20 processor to China, Nvidia stock fell on the loss of sales to a major market. But other customers have stepped up to fill the gap, including sovereign national AI projects and neocloud companies like CoreWeave and xAI.
And don't rule out Nvidia getting back into China, analysts say. The Santa Clara, Calif.-based company is already working on a new product for Chinese customers using the H20 inventory it plans to write off in its fiscal Q1 report. Nvidia might change the memory configuration with those processors to reduce their functionality and satisfy U.S. trade regulators, according to news reports.
Nvidia sold $17 billion worth of chips to China in its fiscal year ended Jan. 26, or 13% of its total sales.
The China Question
The U.S. ban on the sale of H20 to China could be "a negotiating tactic" by the Trump administration, Piper Sandler's Kumar said. "There is a strong chance that the H20 will be allowed to be sold, but it won't happen in the July quarter."
Bernstein's Rasgon concurred.
"My take from the whole H20 ban was that it doesn't make a lot of sense because you're just handing the AI market over to Huawei," he said.
Chinese chipmaker Huawei is now developing homegrown AI processors that some claim are as capable Nvidia processors from three years ago.
On May 13, the U.S. Commerce Department issued new guidance prohibiting the use of Huawei's Ascend AI chips. It said using Huawei Ascend chips anywhere in the world violates U.S. export controls.
Investor Expectations Ahead Of Report
Looking ahead to Nvidia's fiscal first-quarter report, investor expectations are pretty low, Kumar said.
What investors want from Nvidia's report is something the company likely can't give them.
"Most investors we've spoken to want visibility into 2026," Kumar said. "People are asking us, 'Do you think 2026 will be a nice growth year?' But there's no way to answer that right now. However, my understanding is that Nvidia is likely sold out for the rest of the year."
Analysts polled by FactSet expect Nvidia to report earnings of 73 cents a share, up 20% year over year, on sales of $43.3 billion, up 66%, in the April-ended quarter.
Meanwhile, Nvidia stock has formed a double-bottom base with a buy point of 143.44, according to IBD MarketSurge charts. Nvidia ended the regular session May 22 at 132.83.
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