Investors have grown to associate Nvidia (NVDA +2.59%) with soaring stock performance -- and for good reason. The shares' climbing more than 2,000% over the past five years has helped investors generate mind-blowing returns as the artificial intelligence (AI) boom fueled growth for the AI titan, pushing revenue to record levels.
But this doesn't mean the path of Nvidia's stock price has been a straight line upward. Nvidia has experienced its fair share of dips along the way -- and one of those is happening right now. The stock has slipped 16% over the past month, and the tech-heavy Nasdaq has fallen into correction territory, losing 10% from its latest high in December amid concerns about the impact of President Trump's tariffs.
Investors worry that higher prices on imported goods will put pressure on corporate earnings and the consumer's purse. And that's prompted a shift out of high-growth stocks, at least for the moment.
Now, the big question is how long shares of market star Nvidia will remain in the doldrums. Let's gather a few clues by considering how Nvidia stock has bounced back from previous declines.
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The Nvidia of yesterday and the Nvidia of today
Nvidia went public quite a while ago, back in 1999, and at the modest price of $12 per share. Back then, the company's business revolved around serving the video games and graphics market with its high-powered chips. The company has evolved quite a bit since. It still designs these chips, known as graphics processing units (GPUs), but in recent years, it's been selling them and related products and services to many industries. And AI has become the company's biggest growth driver, with data center revenue making up almost 90% of total revenue in the most recent quarter.
Considering all this, it's most useful to look at Nvidia's performance after previous dips in recent years -- when the company, though smaller, resembled the Nvidia of today. So, with this in mind, let's look at the down periods as of 2018.
The tech giant's shares slipped in 2018 amid concerns about tariffs Trump planned during his first term and as demand for graphics cards used in cryptocurrency mining fell, weighing on Nvidia's revenue growth. The stock declined 31% for the year, with losses primarily in the last three months. Nvidia rebounded as of January 2019, and while the stock dipped periodically, it gained for the full year.
Nvidia's triple-digit gain
In February and March 2020, Nvidia stock slid with most of the market during the COVID-19 market crash, but the shares advanced as of April, finishing the year with an increase of 121%. The AI boom was already starting to supercharge the company's growth, with data center revenue advancing 124% in the fiscal year.
Nvidia had a tough time in 2022, along with the Nasdaq, as higher inflation and rising interest rates weighed on growth companies and investors sought stocks less sensitive to economic shifts. The tech giant lost 50% that year, underperforming the Nasdaq.
But as of 2023, Nvidia started its meteoric rise, and from that time through the end of last year, it soared more than 800%. This is as earnings skyrocketed, with revenue and net income both increasing in the triple digits to record levels on a quarterly basis. The AI boom had gained momentum, and Nvidia was benefiting.
NASDAQ: NVDA
Key Data Points
Rewarding patient investors
So, as we look at this history of performance, it's pretty clear that Nvidia has generally recovered quickly from difficult times. Even after a bad year, such as 2022, the company went on to more than make up for it. This shows us that Nvidia hasn't slumped for very long in the past, and when it has, it's still rewarded investors over the long run.
Does this mean recent declines in Nvidia stock will be short-lived? History suggests that could be the case, but it's important to remember that while history has been known to repeat itself, it doesn't do so in every situation. If general economic uncertainties or pressure continue, Nvidia and other growth players may not be ready to rebound any time soon.
The good news, though, is Nvidia's long-term growth prospects remain strong. The AI market is set for explosive growth, tech giants continue to invest billions of dollars in Nvidia's products and services, and Nvidia's focus on innovation should ensure its leadership position. So, even if Nvidia stock struggles longer than we'd like, this top AI player still has what it takes to excel -- from an earnings and stock performance perspective -- over the long term.
