Nvidia Stock at All-Time Highs: Buy, Sell, or Hold?

Key Points

• Nvidia’s revenue jumped 69% in the most recent quarter, and management expects 50% year-over-year revenue growth in Q2.

• The stock's pricey valuation assumes not just growth, but years of dominance in AI chips.

• While demand remains red-hot, potential competition and an inevitable cooling of this investment cycle could pressure pricing and volume.

• 10 stocks we like better than Nvidia ›

Nvidia (NASDAQ: NVDA) stock's 30% slide between Jan. 1 and April 05 has proven to be quite the head fake. Just a few months later, shares are sitting at all-time highs and many analysts think there's more upside ahead. Given the stock's extraordinary momentum, it's a good time to take a close look at the stock.

Can the artificial intelligence (AI) chipmaker live up to the high expectations baked into its stock, or is its big move higher an opportunity for shareholders to take some chips off the table?

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Image source: Getty Images.

The AI boom is just getting started

With a price-to-earnings ratio of about 55 at the time of this writing, investors expect not only more impressive growth from Nvidia but sustained growth for years to come. Fortunately, recent results bode well for this sort of growth profile.

In May, the AI chip company reported revenue of $44.1 billion, up an incredible 69% year over year. Sequentially, quarterly revenue was up 12% year over year. The quarter's main driver was its data center revenue. The segment, which is responsible for providing chips for artificial intelligence models, rose 73% year over year to $39.1 billion.

Looking ahead to Q2, Nvidia expects more strong growth. The company guided for revenue of $45 billion, translating to a year-over-year growth rate of 50%.

What's especially encouraging is Nvidia CEO Jensen Huang's optimism regarding the demand environment for its products. Consider these bullish remarks he made in the company's most recent earnings release.

Global demand for NVIDIA's AI infrastructure is incredibly strong. AI inference token generation has surged tenfold in just one year, and as AI agents become mainstream, the demand for AI computing will accelerate. Countries around the world are recognizing AI as essential infrastructure -- just like electricity and the internet -- and NVIDIA stands at the center of this profound transformation.

Two undeniable risks

Given the company's impressive business momentum and the fact that the market for AI chips appears to still be in its early stages, it may be tempting to quickly conclude that Nvidia is a must-buy stock. But there are two concerns about this tech stock that are often overlooked. First, what happens when the current investment cycle for AI chips begins to taper off? Additionally, what happens if other competitors slowly but surely build chips that can serve as alternatives to Nvidia's AI chips? If just one of these threats to Nvidia's business momentum materializes, volume and pricing could be pressured simultaneously -- and this could send shares lower.

Of course, bulls would argue that since these are still early days for AI and that the demand for Nvidia's chips will be far higher for much longer than some investors think. Additionally, they'd argue that Nvidia's lead over its competitors is so significant that it's nearly impossible for any of them to catch up. Both of these things may be true. But we live in an uncertain world. Chipmaker Intel, too, was once considered virtually invincible. However, Nvidia and other chipmakers outmaneuvered Intel in terms of power efficiency, graphics, and artificial intelligence, leading to Intel's decline.

While it's hard to imagine how Nvidia could be similarly disrupted in the future, embracing some humility when it comes to acknowledging risks is likely a good idea.

Considering Nvidia's impressive business momentum alongside the risks associated with a potentially weaker growth rate in the future and rising competition, I believe there's a balanced conclusion when it comes to the takeaway for investors: Shares may be too pricey to buy today. However, the company's incredible execution makes a good case for holding onto the stock if you already own it. However, shareholders should expect a bumpy ride and ensure they are aware of the associated risks.

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Daniel Sparks and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and Nvidia. The Motley Fool recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.