Nvidia (NVDA) Stock: Should You Buy After This 20% Pullback?

TLDR

• Nvidia stock has fallen 17% from its October high of $212.19 to $175.02 as AI investment concerns grow
• Third quarter revenue increased 62% year-over-year to $57 billion, accelerating from previous quarter
• Data center segment revenue rose 66% to $51.2 billion with CEO reporting Blackwell chips are sold out
• Company trades at 43 times earnings with fourth quarter revenue guidance of $65 billion
• Risks include competition from custom chips, export restrictions to China, and cyclical industry nature

Nvidia shares closed last week at $175.02, marking a 17% decline from the company’s 52-week high of $212.19 reached in late October. The pullback comes as investors demand clearer returns on AI spending and question whether the current boom can continue.

NVIDIA Corporation, NVDA

The chip maker has been a primary beneficiary of the artificial intelligence surge, selling graphics processing units that power data centers training AI models. But that same exposure means the stock could face pressure if AI demand slows.

Revenue Growth Accelerates

Nvidia reported fiscal third-quarter revenue of $57 billion, up 62% from the same period last year. That growth rate actually accelerated from the 56% increase reported in the second quarter.

The data center segment tells the same story. Revenue in that division grew 66% year-over-year to $51.2 billion in the third quarter, faster than the 56% growth in the prior quarter.

Profitability also impressed investors. Operating income climbed 65% year-over-year to $36 billion. Earnings per share increased 67% to $1.30.

For the fourth quarter of fiscal 2026, management guided for revenue of $65 billion, give or take 2%. At the midpoint, that represents roughly 65% year-over-year growth and 14% sequential growth.

Valuation and Risk Factors

The stock currently trades at about 43 times earnings. That valuation requires Nvidia to sustain rapid growth and maintain gross margins in the 70% range.

If either factor shows weakness, the stock could face additional pressure. The semiconductor industry has historically been cyclical, and analysts question whether AI demand can avoid that pattern.

Competition presents another challenge. Tech giants like Alphabet and Amazon are designing their own chips. If those alternatives prove viable, it could threaten Nvidia’s market position.

Export restrictions add uncertainty. Regulatory concerns about AI chip sales to China have already limited the company’s access to that market. While Nvidia has shown it can grow without China, the restrictions reduce visibility into future potential there.

The company’s stock price reflects optimism that may not leave room for error. Investors looking at the recent pullback need to weigh strong business results against a valuation that demands continued excellence.

Analysts note that while there’s no clear evidence AI demand is slowing, markets look forward. Just one or two signs of cooling demand could send shares lower from current levels.

The company’s fiscal fourth-quarter guidance of $65 billion in revenue shows management expects momentum to continue into early 2026.

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