Key Points
-
Nvidia has become the face of the multitrillion-dollar artificial intelligence (AI) revolution.
-
Nvidia’s graphics processing units (GPUs) possess well-defined compute advantages, leading to premium pricing power and, thus far, insatiable demand.
-
All next-big-thing technologies and trends require ample time to mature and develop, which poses a serious problem for Wall Street’s AI darling.
For the last three years, the evolution of artificial intelligence (AI) has been Wall Street’s primary catalyst — and it’s not hard to understand why. Empowering software and systems with the tools needed to make split-second decisions without human supervision is a game-changing advancement for most industries. It’s a technology that can add $15.7 trillion to the global economy by 2030, according to PwC’s AI report, “Sizing the Prize.”
Although all of Wall Street’s major stock indexes have benefited from AI’s rising tide, no company has made the most of the AI revolution quite like Nvidia (NASDAQ: NVDA). In late October, it became the first publicly traded company to reach the $5 trillion plateau. For context, Nvidia closed out 2022 with a $360 billion market cap.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
The concern is that when things seem too good to be true on Wall Street, they usually are. While there are clear-cut catalysts that support Nvidia’s outperformance, history points to a different outcome for the AI darling of investors in the years to come.
Image source: Getty Images.
Nvidia is the face of the artificial intelligence revolution
Nvidia didn’t add over $4 trillion in market value in less than three years by accident. These gains reflect its market share dominance in AI-accelerated data centers.
Nvidia’s graphics processing units (GPUs) are essentially the brains that make enterprise data centers tick. Three generations of its GPUs (Hopper, Blackwell, and Blackwell Ultra) have been the undisputed top option for businesses, with some analysts estimating these chips account for 90% or more of the GPUs currently deployed in enterprise data centers.
All three generations of chips have benefited from persistent AI-GPU scarcity. Even with Nvidia’s competitors ramping up production of their own GPUs, demand has been swamping the available supply. As long as this dynamic persists, Nvidia will have little trouble securing a premium price for its high-end GPUs (often in the $30,000 to $40,000 range per chip).
Furthermore, none of the company’s external competitors have come close to matching the compute abilities of Hopper, Blackwell, and Blackwell Ultra. Catching Nvidia could prove challenging, with CEO Jensen Huang aiming to introduce a new advanced AI chip annually. Next year’s release, Vera Rubin, will run on the all-new Vera data center processor.
In addition to its infrastructure advantages, Nvidia’s CUDA software platform has proved invaluable to its brand. CUDA is the toolkit used by developers to accelerate compute-intensive applications, including the training of large language models. CUDA acts like an anchor for GPU buyers, ensuring they remain loyal to Nvidia’s ecosystem of products and services.
There’s little doubt that AI can positively alter the growth trajectory for businesses over the long term. However, reaching that point is likely to involve many twists and turns, which Wall Street and investors aren’t currently accounting for.
Image source: Getty Images.
History paints a clear picture of what’s to come for Nvidia stock
History has shown that game-changing innovations can lead to significant gains on Wall Street. For instance, the advent and mainstream proliferation of the internet in the mid-1990s opened new sales channels for businesses, spurred the retail investor revolution, and eventually boosted growth rates for corporate America.
But history also shows that hyped innovations and game-changing technologies have, without fail, all endured bubble-bursting events early in their expansion over the last three decades. Keeping in mind that not all next-big-thing trends are tech-based, investors have been taken on a roller-coaster ride with:
-
The advent of the internet
-
Genome decoding
-
U.S. housing
-
Nanotechnology
-
3D printing
-
Electric vehicles
-
Blockchain technology
-
Cannabis
The reason bubbles burst is that investors consistently overestimate the time it takes for hyped technologies and innovations to be adopted, utilized, and optimized — yet this point is somehow lost on investors with every next-big-thing investment cycle.
Although Nvidia’s fiscal third-quarter operating results point to AI infrastructure demand being robust (sales increased by 62% to $57 billion from the prior-year period), the fact remains that most businesses have yet to optimize their AI solutions and/or generate a positive return on their AI investments. This is consistent with what we’ve observed in previous bubbles.
However, it’s not just the historical cycle of next-big-thing trends that’s concerning. Nvidia’s otherworldly valuation is problematic, too, based on what history tells us.
In the year leading up to the bursting of the dot-com bubble, some of Wall Street’s top internet-driven companies saw their trailing-12-month price-to-sales (P/S) ratios peak between 31 and 43. This includes Amazon, Microsoft, and the Nvidia of the internet revolution, Cisco Systems.
Since the dot-com bubble burst, P/S ratios in the neighborhood of 30 to 40 have signaled a bubble in the making for businesses on the leading edge of a next-big-thing trend. In late October and early November, prior to reporting its fiscal third-quarter operating results, Nvidia’s P/S ratio topped 30.
While history has, thus far, a flawless track record of foreshadowing what’s to come with game-changing innovations and hyped trends over the last three decades, it’s not a timing tool. Historical precedent also can’t accurately forecast how far the shares of market-leading stocks in these hyped trends could fall.
But looking back on previous bubble-bursting events suggests a 50% decline in Nvidia stock from its all-time intraday high of $212.19 per share is a minimum expectation. Meta Platforms plunged about 80% from its peak as the metaverse bubble gave way. Internet stocks, such as Amazon, tumbled 90%. Meanwhile, cannabis stocks have lost virtually all of their value.
The good news for Nvidia is that it has other segments generating billions of dollars in sales beyond AI-GPUs, which could help cushion the impact if an AI bubble forms and bursts. This makes an 80% or greater decline in its shares unlikely. Nevertheless, a 50% or greater plunge should be expected if history were to repeat itself.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $580,171!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,084,986!*
Now, it’s worth noting Stock Advisor’s total average return is 1,004% — a market-crushing outperformance compared to 194% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
*Stock Advisor returns as of December 1, 2025
Sean Williams has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Cisco Systems, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.