Six months ago, Nvidia's (NVDA +1.30%) stock price was $183 per share. Six months later, it is barely $5 above that level. This is not what most Nvidia investors expected. Additionally, during that same time frame, Nvidia had two quarterly earnings reports where it disclosed accelerating revenue growth.
Using the same logic that got Nvidia to the spot of the world's largest company, that should have ignited a rally and sent Nvidia to fresh all-time highs, but that's not what has happened. I think there are a few things that will take Nvidia to new highs, and all of them could fall into line over the next few weeks.
Image source: Getty Images.
Nvidia's stock woes aren't its fault
The reality is, Nvidia has been crushing it and likely will continue to crush it. Revenue growth is accelerating and will be further boosted by the launch of its new Rubin chip architecture in 2026. At least over the past two months, we've learned that nothing Nvidia says about demand truly matters to the stock. While I don't agree with that, it's what the market is doing. Instead, we need to focus on external events and Nvidia's clients.
The biggest focus the market wants to see is a return on investment. The bear thesis is rather simple: The artificial intelligence (AI) hyperscalers are spending billions of dollars on computing equipment to handle future AI workloads. If these AI workloads don't produce big enough cash flows, then all of this spending is for nothing.
If we start to see the AI hyperscalers announce viable business models even with massive capital expenditures to build out their footprint, then the market will feel more confident assigning Nvidia a premium multiple, as that would indicate hefty AI spending can continue. The market is definitely in a "show-me" state with AI spending, and may be unwilling to give Nvidia any bit of a premium until we see continued AI spending.
NASDAQ: NVDA
Key Data Points
So, what will cause that?
I think it will take continued outsized growth from cloud computing companies to show that their spending is paying off, alongside a generative AI start-up potentially going public. During that same time frame, Nvidia will need to report rock-solid results, and the market would like to see substantial progress in the Iran peace talks. Fortunately, I think all of those are feasible events and could occur before May is over.
If you haven't purchased Nvidia shares, now looks like a good time, and investors should profit immensely once the stock comes back into favor with the market.
