After its results were released post-market-close on 20 May, the Nvidia (NASDAQ:NVDA) share price fell. It closed the following day at $219. At the moment, the stock is at $209. So over the past couple of weeks, we haven’t seen the share price recover, which has some people a bit concerned. Is it a bigger tell-tale sign?
What the move indicates
Writing just after the results came out, I explained that the market had already set a high bar for earnings. The numbers were indeed impressive. For example, fiscal Q1 revenue was $81.6bn, up 85% year on year. Yet the reaction and the lack of an immediate bounce over the past couple of weeks indicate a few things to me.
A big one is the growing concern about the sustainability of AI spending. Nvidia remains the clear leader in AI accelerators, but investors are beginning to ask questions about how long the current investment cycle can continue. After all, tech giants are collectively spending hundreds of billions of dollars on AI infrastructure. While management teams continue to signal strong demand, some investors worry that spending growth could eventually moderate, leading to slower revenue growth for Nvidia in the years ahead.
Geopolitical risks have also weighed on sentiment. Export restrictions affecting sales to China remain an overhang, and any further tightening of regulations could limit Nvidia’s access to one of the world’s largest technology markets. It doesn’t look like anything is going to change here in the coming months, which I think investors are now processing.
The direction from here
I think the stock could remain volatile in the short term. Nvidia has become one of the market’s most closely watched companies, meaning every data point, from AI spending to semiconductor demand, can trigger sharp movements in the share price.
However, in my view the long-term investment case remains compelling. Without trying to sound like a broken record, Nvidia sits at the centre of one of the most significant technology shifts in decades. Despite all the hype, I think AI is still in the early stages of adoption. Demand for computing power to train and run AI models continues to grow rapidly, supporting the buying case for Nvidia.
Taking a step back, the stock is still up 48% over the past 12 months.
I already have enough exposure to AI, so I don’t need to add more right now. But for investors who don’t have any AI stocks, a short-term move lower in the Nvidia share price could be a good opportunity to consider a purchase. While near-term volatility is likely to persist, those with a long-term view should be able to see past this. If AI adoption continues to spread across industries over the next decade, Nvidia appears well positioned to remain one of the primary beneficiaries.
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Jon Smith has no positions in the shares mentioned
