Artificial intelligence (AI) stocks climbed last year, but it wasn't a particularly smooth road. From concerns about AI spending to worries about potential import tariffs, and finally, questions about a potential AI bubble, these stocks met their share of headwinds. Still, my prediction concerning market bellwether, Nvidia (NVDA +1.10%), in 2025 came true.
I predicted that the company would impress the market, sustaining gross margin levels of more than 70%, and that would help Nvidia stock deliver its third consecutive annual win in 2025. That happened, with Nvidia shares advancing 38%.
Now, here's what I expect to happen next.
Image source: Getty Images.
Nvidia's 2025 headwinds
So, first, let's talk a bit more about Nvidia's path last year. The company encountered the headwinds I mentioned above, plus another: The U.S. reinforced export controls on chips to China, blocking Nvidia's ability to ship chips there as of early in the year. In fact, this lowered gross margin to about 60% in the fiscal first quarter due to a billion-dollar charge linked to this inventory that Nvidia couldn't export.
NASDAQ: NVDA
Key Data Points
Still, the company's gross margin surpassed 70% in the following quarters, and revenue continued to climb in the double digits. In fact, it even picked up pace in the most recent quarter, rising 62% versus 56% in the previous three months.
All of this was thanks to booming demand for Nvidia's top-performing graphics processing units (GPUs), or AI chips, as well as related products and services. Nvidia has maintained its leadership through constant innovation, keeping itself steps ahead of rivals.
As mentioned, this momentum outweighed the pressure of headwinds and resulted in yet another year of gains for Nvidia.
Volatility ahead?
As 2026 begins, investors are eager to know whether this trend will continue. Of course, external elements beyond Nvidia's control -- like the tightening of export controls last year -- could weigh on the stock. Setting aside those risks, I predict the stock will continue to rise, but it will happen amid increased volatility.
I expect the overall high valuation environment that we see today to weigh on appetite for Nvidia stock at certain moments, and as a result, the stock's path won't be linear. As investors consider the possibility of an AI bubble taking shape, they may not go all in on players that, like Nvidia, are heavily dependent on AI.
Still, I expect Nvidia to continue delivering strong earnings growth, and potential catalysts like the U.S.' recent decision to once again allow Nvidia to export chips to China could offer the stock a boost. All of this means that more gains could be on the horizon for Nvidia in 2026 -- even if the path is a bit bumpy.
