This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
It's been a tough start to 2025 for Nvidia (NASDAQ: NVDA), with its stock price down nearly 30% from its record peak of $153.13, reached on January 7.
The company continues to capitalize on strong demand for its high-performance artificial intelligence (AI) chips, yet it hasn't escaped the broader market sell-off amid concerns about the strength of the U.S. economy and the impacts of the trade tariffs being implemented by the Trump administration. Still, longtime shareholders have little to complain about, as Nvidia's stock has returned a spectacular 1,500% over the past five years.
Is this recent weakness present a buy-the-dip opportunity, or does it foreshadow more turbulence ahead? Let's explore whether Nvidia's stock can reclaim its all-time high.
A hypergrowth AI leader
Even amid stock market headwinds this year, the AI revolution is alive and well. Advancements in machine learning, automation, and generative AI are rapidly reshaping the global economy. Nvidia stands at the core of this transformation, with its cutting-edge graphics processing units (GPUs) driving these AI breakthroughs.
In fiscal 2025 (covering the period ended Jan. 26), Nvidia's annual revenue surged 114% to $130.5 billion, fueled by demand from cloud service providers, including tech giants like Alphabet, Amazon, and Microsoft as they expand their data center AI infrastructure. Nvidia leveraged its operational momentum and pricing power to achieve record profitability, with full-year adjusted net income reaching $74.3 billion -- a 130% increase from the previous year.
This growth highlights the emergence of reasoning AI -- systems that emulate human-like problem-solving, along with agentic AI systems that represent autonomous workflows capable of independently executing complex tasks. These capabilities are still in the early stages of widespread global adoption.
By all accounts, Nvidia's trajectory is just getting started as it launches its latest Blackwell chip platform, which promises up to four times the training performance and 30 times the speed of its predecessor architecture. That was the message from Nvidia founder and CEO Jensen Huang, who emphasized that the complexity of AI workloads is accelerating.
At the recent GPU Technology Conference, Huang said:
Customer demand is incredible, and for good reason, because we're at an inflection point in AI -- the amount of computation required is far greater due to reasoning AI, the training of reasoning AI systems, and Agentic systems.
For the year ahead (fiscal 2026), Wall Street analysts tracked by Yahoo! Finance project Nvidia's revenue to grow at an annual rate of 56.6%, with adjusted earnings per share (EPS) rising 51.5% to $4.53. While these figures mark a deceleration from last year's exceptional pace, they still underscore Nvidia's dominant role as the AI leader, with a technological advantage that competitors are still attempting to replicate.
| Metric | FY 2025 | FY 2026 Estimate |
|---|---|---|
| Revenue | $130.5 billion | $204.4 billion |
| Revenue growth (YOY) | 114% | 56.6% |
| EPS | $2.99 | $4.53 |
| Adjusted EPS growth (YOY) | 130% | 51.5% |
Data source: Yahoo! Finance. FY = Fiscal year. YOY = Year over year.
When will Nvidia stock rebound?
Beyond short-term market volatility or headlines about certain companies adjusting their AI investment plans, the underlying demand for Nvidia's top-of-the-line GPUs shows no signs of slowing. Keep in mind that Nvidia AI GPUs have a useful operating life of three to five years. With the Blackwell architecture, early H100 GPUs sold since 2023 are already nearing obsolescence. This suggests an industrywide replacement cycle could sustain Nvidia's sales into the next decade as customers upgrade.
Following the sell-off, Nvidia's valuation looks attractive, trading at 24 times its consensus 2025 EPS as a forward price-to-earnings (P/E) ratio -- a level well below its three-year average earnings multiple of around 35. One interpretation is that Nvidia stock might be 43% undervalued, and a return to its previous high above $150 per share could bring it closer to fair value this year.
Notably, Nvidia has beaten Wall Street revenue estimates for 22 consecutive quarters. Another record-breaking result when it reports first-quarter earnings could be the catalyst the stock needs to rally higher.
NVDA PE Ratio (Forward) data by YCharts
Is Nvidia a buy?
I believe it's only a matter of time before Nvidia's stock returns to and ultimately exceeds its previous peak. With AI adoption accelerating globally, Nvidia remains a best-in-class stock for tech sector exposure. As long as macroeconomic conditions remain resilient, Nvidia stock is poised to lead higher and is a great option for investors within a diversified portfolio.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
