Tech stocks are getting routed today, and Nvidia (NASDAQ:NVDA) is no exception. Investors are concerned that planned spending on artificial intelligence (AI) infrastructure won’t materialize next year.
That’s leading to a sharp unwinding of the AI trade. Nvidia shares slid as much as 9% and were still down by 7.3% as of 12:22 p.m. ET. Here’s what has investors nervous about Nvidia, and why those concerns may be overstated.
Missed AI’s “Act 1”? Act 2 Could Be 16x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
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Nvidia’s sales have exploded largely thanks to the AI build-out. The company provides more than just high-power chips for AI needs. It offers an end-to-end platform that integrates hardware, networking, and layered software to accelerate AI, high-performance computing (HPC), and graphics workloads.
Nvidia has also invested in several other companies that, in turn, buy Nvidia’s products as they add data center capacity. That “circular financing” might have investors thinking any slowdown in data center growth would negatively impact Nvidia’s investments, too.
What investors seem to be overlooking right now, though, is just how strong the demand for Nvidia’s products remains. In its latest quarterly conference call in August, CFO Colette Kress said the company expects 70% revenue growth in fiscal 2028, which corresponds closely to calendar year 2027. But she also noted that, “This is a supply-constrained outlook.”
If data center projects are delayed or canceled, Nvidia will be able to redirect sales to other states or countries where growth and construction plans are continuing.
Nvidia’s stock price now values the company at a forward price-to-earnings (P/E) multiple of about 14, according to FactSet Research. That’s a meaningful discount to the overall market for a company that should still achieve 70% sales growth next year. Buyers of the stock after today’s plunge may look very prescient a year from now and beyond.
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