Investors have come to associate Nvidia (NASDAQ: NVDA) with exceptional stock performance, which is understandable given that the stock has surged over 2,000% in the past five years. This growth has generated impressive returns for investors as the artificial intelligence (AI) boom has driven the AI giant’s revenue to new highs.
However, Nvidia’s stock price trajectory has not been a continuous upward climb. The company has experienced several downturns, including a recent 16% decline over the past month. Simultaneously, the tech-heavy Nasdaq entered correction territory, losing 10% from its December peak due to worries about the effects of President Trump’s tariffs. Investors fear that increased tariffs on imports could pressure corporate earnings and consumer spending, leading to a temporary shift away from high-growth stocks.
Currently, there is speculation about how long Nvidia’s shares will remain in their current slump. Insights might be gleaned by examining Nvidia’s recovery following past declines.
Nvidia went public in 1999, initially focusing on the video games and graphics sector through its graphics processing units (GPUs). In recent years, the company has expanded, selling chips and related products across various industries, with AI emerging as its main growth driver. In the latest quarter, data center revenue comprised nearly 90% of Nvidia’s total revenue.
Looking at the past, Nvidia faced a challenging period in 2018 due to concerns over tariffs from Trump’s first term and a decrease in demand for graphics cards used in cryptocurrency mining, which impacted revenue growth. The company’s stock fell by 31% that year, mainly during the last three months. Despite periodic declines, Nvidia rebounded at the start of 2019 and achieved gains for the entire year.
In 2020, Nvidia’s stock fell during the COVID-19 market crash but rebounded by April, ending the year with a 121% increase as the AI boom significantly boosted company growth, with data center revenue rising by 124% in the fiscal year.
In 2022, Nvidia, alongside Nasdaq, struggled with high inflation and interest rates, leading to a 50% decline in Nvidia’s stock, underperforming against Nasdaq.
By 2023, Nvidia began a significant ascent, with its stock rising over 800% from the beginning of that year until the end, as both revenue and net income reached record levels. This growth was fueled by the momentum gained from the AI boom.
Evaluating Nvidia’s past performance suggests that the company has generally rebounded swiftly from tough periods. Even after a challenging year in 2022, Nvidia managed to more than recover, demonstrating that it hasn’t remained in a slump for long and has historically rewarded its investors over the long term.
While history indicates that Nvidia’s current declines might be temporary, ongoing economic uncertainties could delay recovery for Nvidia and other growth stocks. Nonetheless, Nvidia maintains strong long-term growth prospects. The AI market is poised for significant expansion, with substantial investments from tech giants in Nvidia’s offerings. The company’s dedication to innovation should ensure its continued leadership. Thus, despite potential short-term struggles, Nvidia is well-positioned to succeed in both earnings and stock performance over the long term.