Could This AI Chip Stock Make a Major Comeback by the End of the Year?

Artificial intelligence (AI) chipmaker Nvidia (NASDAQ: NVDA) has had a rough couple of months, with its stock down about 17% from its October peak. The last time Nvidia's shares were this far off their highs -- almost a year ago -- it took nearly six months for them to recover.

However, could we be in for a holiday miracle? Could the stock not only regain its lost ground, but also hit new highs in the last 10 trading days of the year?

Here's why it might actually happen -- and the one big obstacle standing in the way.

Image source: Nvidia.

What history says

Nvidia's stock is no stranger to December "mini-surges." Just last year, for example, its shares rose 8.8% between Dec. 18 and Dec. 24. The year before that, its stock shot up 10.1% between Dec. 6 and Dec. 18. And in 2022, its shares jumped 13% between Dec. 6 and Dec. 13.

Those are all impressive moves, but in order for the stock to return to October's record $207.04 closing price, it would have to rise by about 17.4%. That's a tall order, but it isn't impossible.

In fact, Nvidia's done it before. In 2016, share prices surged a huge 33.9% between Dec. 1 and Dec. 27, with 16.8% of that rise occurring between the 16th and the 27th of the month. So a 2025 repeat isn't outside the realm of possibility. That said, the company's market cap in December 2016 was less than $64 billion, a far cry from its current $4.3 trillion valuation.

Plus, in recent years, the stock has also seen a few double-digit declines in December. Some of them even happened alongside the stock's record jumps. Last year, for example, right before its 8.8% surge, Nvidia had dropped 11.2%. In 2022, right after its 13% jump, shares fell 22.3%. And in some years, there was no major jump or big plunge at all.

Reflecting the market

Nvidia's end-of-year moves have tended to mirror the overall market, only with more intensity. For example, that big 22.3% price drop in December 2022 reflected a 5.9% decline in the S&P 500. Last year, during its 11.2% December slide, the broader market also slid by 3.5%.

In other words, if the S&P 500 is doing well, Nvidia's stock tends to be doing really well. If the broader market is doing badly, its shares tend to be doing really badly.

Unfortunately, the market's growth has slowed over the past few quarters. Between its April 5 low and the end of the second quarter, the S&P 500 rose by a robust 24.5%. In the third quarter, it rose just 7.8%. So far in the fourth, it's only risen 1.9%.

That slowing growth came despite three Federal Reserve interest rate cuts, in September, October, and December. There won't be any further rate cuts this year.

That makes it unlikely that there will be a big year-end market surge that will benefit Nvidia stock. The likeliest reason for the shares to surge would be some major company-specific news.

What news is left?

But Nvidia has already put out excellent news in its third-quarter earnings report on Nov. 19.

The company reported record revenue of $57 billion, up 62% year over year; per-share earnings of $1.30, up 67%; and an impressive gross margin of 73.4%, as measured under generally accepted accounting principles (GAAP). Sales of its Blackwell chips are "off the charts," according to CEO Jensen Huang, and cloud graphics processing units (GPUs) are sold out. The company is expecting $65 billion in revenue in the fourth quarter, with 74.8% GAAP gross margins.

It's hard to think of what more the company could possibly announce that would be enough to boost its shares by 17.4%, or about $700 billion in market value. That's more than the entire market caps of Costco and Coca-Cola combined.

Unless a major issue emerges over the next couple of weeks with Alphabet's tensor processing units (TPUs) or AMD's high-end chips, which are expected to compete with Nvidia's GPUs, I really can't think of any likely scenario that would add so much value to Nvidia so quickly.

That's why it doesn't seem likely that the stock will make enough of a comeback to hit new highs by the end of 2025. But so what? Given the company's very strong outlook, 2026 is shaping up to be a big banner year for the chipmaker, and if the price is a bit cheaper during the holidays, it offers an opportunity for new investors to buy Nvidia shares at a discount.

John Bromels has positions in Alphabet, Coca-Cola, Costco Wholesale, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Costco Wholesale, and Nvidia. The Motley Fool has a disclosure policy.