Nvidia stock on Monday fell into a correction after failing to break out of its recent slump. Shares fell 1.7% to $132, down 11% from their highest closing price of $148.88 set on Nov. 7.
The chip maker has had a phenomenal year overall, with its stock rising nearly 170% in 2024. Nvidia was also briefly the most valuable publicly traded company in the world as recently as June, beating out both Apple and Microsoft. The market is weighing challenges to sales of Nvidia's artificial intelligence processors.
Nvidia has largely traded sideways over the past month as the market continues to wait for evidence of how quickly it can ramp up sales of its Blackwell artificial intelligence chips. While the company is expected to remain dominant in the AI processor market for the foreseeable future, it faces some geopolitical headwinds.
The U.S. is preparing rules that would introduce caps on the sale of advanced AI chips in regions such as Southeast Asia and the Middle East to restrict China's access to computing power hosted in other countries, The Wall Street Journal reported on Friday, citing people familiar with the matter.
Another obstacle facing the company is the high bar set by its own stunning growth over the last two years. The consensus among analysts polled by FactSet is for Nvidia's revenue to rise by 55% in 2025 to $191.45 billion, compared with expectations that it will have more than doubled in 2024 to $123.37 billion.
The slowdown in projected revenue growth doesn't tell the full story. Nvidia's adjusted earnings per share are expected to rise more sharply to $4.20 in 2025 from $2.72 in 2024.
Finally, the company could be suffering from impatient investors seeking other stocks for short-term gains. Among other chip makers, Broadcom gained 11% Monday, continuing its rally after an earnings report that sent the stock soaring 24% on Friday on the potential for its custom AI chips.
"Uncertainties in Nvidia Blackwell deliveries, lack of industrial/auto recovery and fear of China restrictions has weighed on semi stocks...meanwhile, investor attention has rotated to China 'resistant' and AI beneficiary software stocks," wrote BofA Securities Vivek Arya in a research note on Monday.
However, Arya maintained Nvidia as a "Top Pick" in the semiconductor sector for 2025, arguing Blackwell deployments by U.S. customers are set to boost AI chip stocks.
Comments