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So far, 2025 hasn’t been a good year for Nvidia (NASDAQ:NVDA) shares. The share price has fallen 16% since the start of January as the stock market’s sentiment has changed sharply from 2024.
Exchange rate fluctuations aside, that means a £10,000 investment is worth £8,386 today. I wrote back in December that I was wary about Nvidia heading into 2025, so did it hit the nail on the head with this one?
Was I right?
My view at the end of last year had nothing to do with DeepSeek. I just expected Nvidia to be unable to maintain its incredible growth rate and the stock price to come down as a result.
That’s definitely part of the story. In its most recent update, the company reported annual sales growth of 78% for the last quarter and its guidance was for 65% in the next three-month period.
As much as I’d like to, however, I’m not claiming full credit for this. There have been a lot of other issues contributing to a volatile stock, several of which are political.
A number of these focus on China. The potential of increased export restrictions from the US, combined with reports of more cost-effective artificial intelligence products are all a concern.
Is it that bad?
A look at the share price suggests investors are concerned. Nvidia shares are down and trading at a forward price-to-earnings (P/E) ratio of 20 – lower than Coca-Cola (23) or Starbucks (31).
Despite this, the underlying business isn’t exactly doing badly. After all, Coke and Starbucks aren’t set to post 65% revenue growth at any point in the foreseeable future!
Investors, however, should probably apply a bit more context. The stock is still 36% higher than it was 12 months ago and that’s while other semiconductor stocks have been struggling.
Two that I’ve been following – Onsemi and Microchip Technologies – have seen declines of 44% and 33%, respectively, in that time. So Nvidia has fared much better than some other chip stocks.
What are the risks?
In general, I’m wary of semiconductor investments. The decline of Intel has shown that even the companies with the biggest research and development budgets are risky investments.
Now, Nvidia doesn’t look like the next Intel. Even while it’s ramping up production of its latest Blackwell chip, it’s making progress with successors Blackwell Ultra, Vera Rubin, and beyond.
This, however, makes me wary. Ultimately, the need to keep innovating and reinvesting to stay ahead in a highly competitive field cuts into the cash that can be used for shareholder returns.
I’m concerned semiconductor firms might not be able to get to a position where they can focus on shareholder returns without undermining their competitive position. And that worries me.
Should I buy the dip?
I don’t see the falling share price as a sign that anything is wrong with Nvidia. And the risks that have been there since the start of the year don’t seem any more real to me now.
The stock could potentially reach a level where I’m ready to consider buying it. But it hasn’t quite got there yet.
