Nvidia (NVDA +0.64%) has been one of the biggest winners of the generative artificial intelligence (AI) boom. The stock advanced 1,000% between the launch of ChatGPT in November 2022 and January 2025, when its price peaked at $149.43 per share.
Nvidia stock has since fallen 35% due to escalating trade tensions and concerns about the sustainability of AI infrastructure spending. However, history says shares could soar from here. The chipmaker suffered three drawdowns exceeding 35% in the last decade, and the stock returned an average of 305% during the next two years.
Here's what investors should know.
NASDAQ: NVDA
Key Data Points
History says Nvidia shares could soar 305% in the next two years
Nvidia generated immense returns for shareholders in the past decade as its graphics processing units (GPUs) revolutionized computer graphics and data center computing. Its share price increased 17,400% during that period.
But even the best companies go through difficult times. Despite generating tremendous returns, Nvidia shares declined more than 35% three times in the past decade, and investors can learn something for those incidents:
- 2018: Nvidia stock peaked at $7.23 per share in October 2018 before falling 56% to $3.17 by December 2018. The decline was primarily due to disappointing financial results as the cryptocurrency market crash hurt demand for its GPUs. However, escalating trade tensions between the U.S. and China also contributed to the losses. But Nvidia stock hit a new high 16 months later and returned 182% over the two-year period following the day it first closed 35% below its high.
- 2020: Nvidia stock peaked at $8.54 per share in February 2020 before falling 38% to $5.33 by March 2020. The last major drawdown was due to company-specific problems, but this one was brought on by the broader stock market crash that followed the onset of the COVID-19 pandemic. But Nvidia stock reached a new high less than two months later and returned 400% during the two-year period following the day it first closed 35% below its high.
- 2021: Nvidia stock peaked at $33.38 per share in November 2021 before tumbling 66% to $11.23 per share by October 2022. The decline coincided with a downturn in the broader semiconductor industry, which itself was due to a supply glut caused by sharp fluctuations in consumer demand during the pandemic. But Nvidia stock hit a new high six months later and returned 335% over the two-year period following the day it first closed 35% below its high.
To summarize, Nvidia stock declined more than 35% three times over the past decade. But the stock not only rebounded and reached new highs, but also returned an average of 305% during the subsequent two years. Applied to the current situation, those numbers suggest Nvidia shareholders could see triple-digit gains by April 2027.
Past performance is no guarantee of future results, but there is still an important lesson for investors: Demand for Nvidia GPUs has faltered in the past, much like investors fear will happen in the future. However, demand has always recovered because the company builds the fastest data center accelerators on the market, and the use cases are always evolving.
Image source: Getty Images.
Nvidia is the market leader in AI accelerators
Nvidia GPUs are the industry standard in accelerating data center workloads like training machine learning models and running artificial intelligence (AI) applications. The company has about 98% market share in data center GPUs, and more than 85% market share in AI accelerators, according to Morgan Stanley.
Some investors are worried about DeepSeek, a Chinese AI start-up that reportedly trained sophisticated large language models while spending much less money than OpenAI and other U.S. companies. The market reacted as if the cost efficiencies would hurt demand for Nvidia GPUs by allowing U.S. companies to spend less on AI infrastructure.
However, many analysts expect the opposite outcome. As costs decrease and AI becomes accessible to more companies, total demand for Nvidia GPUs should continue to increase.
Moreover, Nvidia has opportunities beyond large language models and generative AI, such as physical AI applications like autonomous cars and robots. Those use case will continue to drive demand for its chips and systems.
Also, Nvidia supports its GPUs with adjacent data center hardware like central processing units (CPUs), networking gear, and interconnects. That vertical integration lets Nvidia design data center systems with a superior total cost of ownership versus products from other chipmakers. That advantage should keep the company at the forefront of the AI revolution.
Nvidia stock is a worthwhile investment at its current price
Admittedly, in the coming years, Nvidia will face more competition from ASICs (application-specific integrated circuits) developed by Broadcom and Marvell. ASICs are custom chips purpose-built for specific workloads such as artificial intelligence. But the threat to Nvidia is not as great as many investors imagine.
Nvidia supports its GPUs with a extensive suite of software development tools called CUDA, but there is no equivalent for ASICs, which means companies must develop applications from scratch. That means ASICs are only an option for companies with technical expertise. Moreover, Morgan Stanley says the Nvidia B200 GPU will offer twice as much performance per unit cost than the best ASIC on the market.
Consequently, while Nvidia will likely lose some market share in the coming years, its GPUs may still account for over 80% of AI accelerator sales by 2030. That hints at durable revenue growth because the AI accelerator market is projected to increase at 29% annually during that period, according to Grand View Research.
Additionally, Nvidia has adjacent opportunities in networking gear and software, such that Wall Street expects earnings to increase at 38% annually through fiscal 2027, which ends in January 2027. That makes the current valuation of 32 times earnings look cheap, especially because Nvidia topped the consensus estimate by an average of 10% in the last six quarters.
Nvidia shares are down 35% from their record high, but the stock has rebounded from worse losses in the past. There is no telling how long it will take for that to happen, but Nvidia still has a long runway for growth, and the stock looks cheap at its current valuation. For those reasons, patient investors should feel confident buying a position today.
