Nvidia Stock Faces Challenges Amid Uncertainty, But Long-term Outlook Remains Strong

Investing in artificial intelligence (AI) stocks in 2023 or 2024 has generally yielded gains. However, the story is different for those investing in AI stocks this year. Uncertainty has plagued the technology sector throughout 2025, dampening enthusiasm around the AI trend.

At the start of the year, Chinese start-up DeepSeek made headlines by claiming it could build and train AI models on par with ChatGPT and other leading platforms, but at a fraction of the cost. This announcement shocked investors globally.

Policy Changes and Market Impact

The situation worsened with President Donald Trump’s tariffs and ensuing trade negotiations, which raised concerns about their impact on high-growth businesses.

These events have left investors facing significant uncertainty. Nvidia (NASDAQ: NVDA) is one stock that has felt the brunt of this turbulence. At one point, Nvidia shares fell 30% year-to-date, erasing nearly $1 trillion in market cap.

As of mid-May, Nvidia’s stock has returned to breakeven for the year. Analysts remain optimistic, expecting Nvidia to reclaim its status as one of the world’s most valuable businesses by the end of 2025.

Upcoming Earnings Report: What to Monitor

Nvidia is set to report earnings for the fourth quarter and the full fiscal year 2025 on May 28. Management has provided revenue guidance of $43.0 billion for the first quarter (with a margin of plus or minus 2%) and a gross margin of 70.6% (plus or minus 50 basis points).

While these figures are useful for holding management accountable, they must be viewed in the context of the tariffs and export controls affecting Nvidia’s core market, China. If Nvidia misses its guidance, there are justifiable reasons for such an outcome. However, many remain confident about Nvidia’s long-term growth prospects.

Image source: Getty Images.

Strong Market Signals for Nvidia’s Future

Recent insights from other leading tech companies indicate a robust demand for AI infrastructure. Microsoft, Amazon, and Alphabet have maintained their capital expenditure forecasts for this year, collectively budgeting over $250 billion, much of which will be directed toward AI projects. Meta Platforms has even raised its capex outlook to as high as $72 billion.

These trends suggest the AI industry’s major players expect ongoing demand for their products and services, which bodes well for Nvidia’s chip sales.

Data by YCharts.

If Nvidia’s upcoming earnings report appears subdued, its long-term outlook remains promising. Currently, the stock’s forward price-to-earnings (P/E) ratio is below its peak levels from the previous year.

Investors should maintain focus on Nvidia’s broader market position rather than short-term challenges. As big tech continues to invest in AI infrastructure, Nvidia’s dominant market share allows it to secure a significant portion of that spend.

Given these factors, the bullish sentiment surrounding Nvidia is likely to strengthen in the latter half of the year.

A New Investment Opportunity

For those feeling they may have missed earlier opportunities in successful stocks, now could be a strategic time to consider new investments. Analysts occasionally identify stocks poised for growth, offering a chance to capitalize on potential gains.

• Nvidia: If you invested $1,000 when we highlighted it in 2009, you’d have $351,127!
• Apple: If you invested $1,000 when we highlighted it in 2008, you’d have $40,106!
• Netflix: If you invested $1,000 when we highlighted it in 2004, you’d have $642,582!

Our team currently has recommendations for three promising companies. Market conditions could change quickly, so acting sooner rather than later may be wise.

The views and opinions expressed herein are those of the author and may not reflect the views of Nasdaq, Inc.