After Soaring In 2025, Is It Time to Take Profits on This High-Flying AI Stock? Or Is It Time to Double Down?

With 2025 finally coming to a close, graphics processing units (GPUs) maker Nvidia (NASDAQ: NVDA) stock put up yet another year of extraordinary growth as its AI (artificial intelligence) products flew off the shelves and the company's revenue and profits soared. In total, shares rose about 39% in 2025. And that's on top of a 171% gain in 2024.

The big question for Nvidia investors now is whether it's time to take some profits on the stock.

This article will take a look at Nvidia's business and the valuation of its stock to determine what investors should do with their shares of this high-flying AI stock.

Image source: Getty Images.

Finishing 2025 strong

The boom in AI infrastructure spending has led to explosive growth at Nvidia, with recent results demonstrating an acceleration.

In fiscal Q3 (the period ended Oct. 26, 2025), the chipmaker saw its quarterly revenue hit $57.0 billion, up 62% year over year. That marks an acceleration from 56% growth in fiscal Q2, showing how powerful the tech company's growth story is.

And profits have continued soaring this year. Nvidia reported $26.4 billion of net income in fiscal Q2, up 59% year over year. Then it grew net income 65% year over year in fiscal Q3 to $31.9 billion.

Zooming out to look at the trailing nine months ended Oct. 26, Nvidia grew revenue 62% year over year to $147.8 billion and grew net income 52% year over year to $77.1 billion.

"Blackwell sales are off the charts, and cloud GPUs are sold out," said Nvidia CEO Jensen Huang in the company's fiscal third-quarter earnings release.

This wild growth and staggering demand for its products help explain why investors have remained so upbeat about the growth stock throughout the year.

What about Nvidia stock's valuation?

But does Nvidia really deserve to trade at a price-to-earnings ratio of 46?

This depends on how sustainable you view the demand boom the company is seeing for its products. While it's tempting to quickly call the AI infrastructure demand surge a bubble, it's better to look deeper.

Huang addressed concerns about an AI bubble directly in the company's most recent earnings call, noting that it sees "something very different." He thinks this demand surge is sustainable because there are three "massive platform shifts" occurring at once -- and Nvidia is at the center of each. The first is a transition from central processing units (CPUs) to GPUs. The second platform shift is occurring because AI is both transforming existing applications and enabling entirely new ones. And the third platform shift driving demand for AI computing is the rise of agentic AI systems.

For investors who believe these three platform shifts are still in the early innings, Nvidia shares probably look attractive. But for those who, like me, are more skeptical, it may be a good time to take some profits on Nvidia stock.

While I do think all three of these platform shifts are real, I'm not sure about how strong the demand waves from each of these shifts will be, or if there will be a consolidation phase at some point in which spending on AI infrastructure pauses and companies digest the computing power they've already purchased. In addition, I worry that formidable competition to Nvidia's GPUs could arise from well-capitalized technology giants like Amazon and Alphabet. Indeed, Alphabet and Amazon are finding some reasonable in-house built alternatives.

So, should investors sell their Nvidia shares? Not necessarily. But should they trim their position? If it has grown to become an oversized position in an otherwise well-diversified portfolio, I think this could make sense. After all, if competition intensifies, and if today's demand boom turns out to be a bubble, both Nvidia's sales and profit margin could suffer -- and the stock could get crushed. But keeping a small position in the stock will still let investors benefit if it turns out that we are still in the early innings of this AI demand boom.

Should investors double down? No matter how bullish you are on Nvidia, the time to do something like this is probably on a big pullback -- not after the extraordinary run the stock has had in recent years. Additionally, even if you believe in the company and the stock, there's no reason to increase your exposure and, in turn, your risk of loss if things don't work out as expected.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy.