Here's What I Think Is Going On With Nvidia Stock

Nvidia (NASDAQ: NVDA) delivered a spectacular fiscal 2026 fourth-quarter earnings report, trouncing Wall Street's expectations and demonstrating incredible growth. However, the stock fell after the report, and it's slightly down for the year.

Here's what I think is going on.

The near term: Competition and an AI bubble

There's no question that Nvidia's latest quarter was a stellar continuation of its phenomenal growth story. Although it has been a growth stock for decades, the company became a part of popular culture with the advent of generative artificial intelligence (AI) in 2022, as it became clear that its powerful graphics processing units (GPUs) were the best available chips to power the new software. And Nvidia has continued to drive innovation and development in the space.

Image source: Nvidia.

However, as it always goes in the technology realm, nothing stays stagnant, and competition is emerging. Nvidia's processors are not cheap, and other chipmakers are developing alternatives that can handle the data inference and training process, often for a lot less money. Amazon, for example, has its own Tranium AI accelerators and Graviton CPUs, and the company has 1.4 million Tranium2 chips fully subscribed. Alphabet's newest Tensor Processing Units are 10 times faster than the previous iteration while being almost twice as efficient. Broadcom's custom application-specific integrated circuits (ASICs) are designed in collaboration with its hyperscaler clients to handle specific AI workloads efficiently, and management is expecting their sales to ramp up over the next few years.

On top of that, the market is already worried that Nvidia's main clients are overspending on AI infrastructure, and that the bubble will eventually burst. That would lead to slowing sales and a sluggish business.

The long term: Will Nvidia still be relevant?

In general, I tend to caution investors to look past near-term headwinds and focus on long-term opportunities. Periods when short-term issues are sending good stocks down can turn out to be the best buying opportunities. However, what the market sees as the problem for Nvidia is precisely its long-term opportunity.

Sure, right now, Nvidia is on top of the world -- or the stock market, at least -- reporting excellent performance and fielding tremendous demand. Its sales growth accelerated to 73% year over year in its fiscal 2026 fourth quarter (which ended Jan. 25), and there's been no letup in demand. Nvidia is preparing to start shipping processors based on its new Vera Rubin architecture, which is even more powerful than its current Blackwell Ultra line, and management foresees accelerating revenue growth through the calendar year.

From my vantage point, Nvidia is setting itself up to stay dominant and protect its moat. It's launching new products that vertically integrate with its ecosystem, setting up high barriers to entry for rivals to its most powerful offerings, and positioning its wares to work concurrently with other chips that may offer advantages on price. Companies like Amazon offer these kinds of options to their cloud clients.

I understand the market's worries, but I still think Nvidia has a lot of share price growth to offer long-term investors. However, you may not want it to take up too large a position in a well-diversified portfolio.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.