Nvidia's stock risks include its extremely high valuation (a potential "AI bubble"), intense competition from rivals like AMD and custom chips from hyperscalers (Google, Amazon, Microsoft), geopolitical challenges like U.S. export controls to China, dependence on continued high AI demand, and potential cyclical downturns as the AI spending supercycle matures. While its CUDA software offers a strong moat, any slowdown in AI investment or major competitive breakthrough could significantly impact its growth and stock performance, leading to sharp corrections.
If past trends are a reliable indicator, NVDA stock is susceptible to abrupt and significant drops. In particular, we identify these risks: Bloating Accounts Receivable and Channel Saturation. Hyperscaler Bargaining Power and In-House Competition.
From $5,000 to nearly $1 million in a decade
This amount assumes you reinvested the modest dividends Nvidia pays.
No, Warren Buffett and Berkshire Hathaway do not directly own Nvidia (NVDA) stock, sticking to his value investing principles, but they have gained indirect exposure and profits through large holdings in S&P 500 index funds (like SPY and VOO) that contain Nvidia due to its high market cap, and by investing heavily in companies like Alphabet (Google) that are major buyers of Nvidia's AI chips, making it a proxy for the AI boom.
A gain of over 22,000%
If you had invested $10,000 in Nvidia 10 years ago and held on through all the flat, rocky, and exhilarating years that followed, your current investment would be worth well over $2.2 million.
NVIDIA does nearly $100 billion per year in profit, and that's with profit growing at 65% year over year. It's a pretty impressive company. Despite all that, top NVIDIA shareholders have been selling their NVIDIA stock lately, with Stanley Druckenmiller being one known billionaire seller.
The 7% sell rule is a stock trading guideline to cut losses quickly, advising you to sell a stock if it drops 7-8% below your purchase price to protect capital, remove emotion, and prevent small losses from becoming catastrophic, a strategy popularized by William O'Neil's CAN SLIM method for growth investing. It assumes that truly strong stocks typically don't fall much below their buy point, so a dip signals something is wrong, requiring you to exit the trade to preserve funds for better opportunities.
Nvidia's 2025 outlook reflects cautious optimism, with modest upside expected if the company continues executing on its AI and data center roadmap. Its premium valuation signals strong confidence from the market, but it also leaves little room for disappointment.
Investing $10,000 in Apple (AAPL) stock in 1990 would have yielded an astronomical return, making you a multimillionaire many times over by today, with calculations suggesting it would be worth tens of millions of dollars (or potentially over $100 million with dividends reinvested) due to incredible growth, stock splits, and the success of products like the iPhone, though exact figures vary slightly based on calculation dates and dividend reinvestment, Yahoo Finance.
But perhaps the biggest threat to Nvidia going forward is a name no one expected. That's Alphabet (GOOG 0.80%) (GOOGL 0.80%), which is reportedly in talks with Facebook parent Meta Platforms to sell it billions of dollars' worth of AI processing chips. Nvidia shareholders should be concerned.
Nvidia is forecast to deliver impressive growth yet again in 2026. Nebius Group should put up remarkable growth this year. The Trade Desk is set to bounce back in 2026.
Bill Gates NVIDIA Corp
The investor sold all their shares in Q4 2023 and doesn't own any shares in NVIDIA anymore.
Key Points
Nvidia's share price has surged more than 1,200% over the past five years. Data center infrastructure spending is expected to reach as high as $4 trillion by 2030. The initial catalysts for the AI boom have passed, but Nvidia stock could still be a good long-term investment.
Nvidia's monster gains are hard to fathom
Nvidia shares have produced a total return of 1,360% in the past five years (as of Jan. 16). This impressive gain would've turned a $1,000 starting capital outlay into $14,590 today.
The "Rule of 90" in stocks most commonly refers to Warren Buffett's advice for his wife's inheritance: 90% in a low-cost S&P 500 index fund for growth and 10% in short-term government bonds for stability, designed for long-term investors. However, a more pessimistic "Rule of 90-90-90" suggests 90% of new traders lose 90% of their capital within 90 days, highlighting the high failure rate due to lack of education, emotional trading, and poor risk management.
In the past 10 years, Nvidia's stock is up an eye-popping 22,420%, meaning a $1,000 investment made a decade ago would be worth over $225,000. Talk about a return on investment.