Nvidia Stock Down 1.2%. Why Growth May Slow And Why Not To Buy $NVDA

Nvidia CEO Jensen Huang delivers a keynote address at the Consumer Electronics Show (CES) in Las Vegas, Nevada on January 6, 2025. Gadgets, robots and vehicles imbued with artificial intelligence will once again vie for attention at the Consumer Electronics Show, as vendors behind the scenes will seek ways to deal with tariffs threatened by US President-elect Donald Trump. The annual Consumer Electronics Show (CES) opens formally in Las Vegas on January 7, 2025, but preceding days are packed with product announcements. (Photo by Patrick T. Fallon / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images)

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Nvidia stock fell 3.2% Wednesday after reporting record sales, falling short on data-center revenue, and predicting cooler growth, according to the Wall Street Journal.

Does this slight dip represent a buying opportunity? If Nvidia can accelerate revenue growth, its share price will rise. Here are three reasons that may not happen:

• Nvidia revenue from China could fall short.
• Nvidia’s revenue growth has continued to decelerate along with its stock price.
• AI’s failure to offer a compelling payoff for companies may slow data center demand.

Nvidia is optimistic about the company’s future. “This year is a record-breaking year,” Nvidia CEO Jensen Huang said, reported the Journal. “I expect next year to be a record-breaking year” as well, he added.

Nvidia’s Fiscal Year 2026 Second Quarter Performance And Prospects

With the exception of its data center business, Nvidia beat expectations in Q2 2026 and issued slower Q3 growth guidance – still ahead of analyst forecasts. Overall, the chip designer reported “better-than-expected earnings and revenue on Wednesday, and said sales growth this quarter will remain above 50%,” according to CNBC.

Here are the key numbers:

• Second quarter 2026 revenue: $46.74 billion – up 56% and $68 million more than the London Stock Exchange Group consensus, noted CNBC.
• Q2 data center revenue: $41.1 billion – up 56% and $200 million short of StreetAccount analyst expectations, reported the Journal.
• Q2 adjusted earnings per share: $1.05 – up 73% and 4 cents more than the LSEG estimate, wrote CNBC.
• Q3 revenue guidance: $54 billion, plus or minus 2%, while analysts expected $53.1 billion, according to LSEG. This guidance assumes no sales in China.

The absence of revenue from China affected Nvidia’s data center results. The company generated $33.8 billion in GPU data center sales – a 1% decline from the first quarter. The company sold $4 billion fewer H20 chips – which are designated for the Chinese market, Nvidia chief financial officer Colleen Kress said in a statement.

Nvidia is bullish on its latest GPUs – the Blackwell line. Their revenue increased 17% between the first and second quarters – indicating “demand is extraordinary,” Nvidia CEO Jensen Huang told the Journal. In May, Nvidia said Blackwell – which accounted for roughly 70% of data center revenue – reached $27 billion in sales, reported CNBC.

The company sees tremendous growth ahead. The largest AI companies will spend $3 trillion to $4 trillion by 2030, based on their current level of capital expenditures, and Nvidia could capture “as much as 70% of that revenue,” Huang said, according to the Journal.

Nvidia’s China Challenges And Opportunities

Will Nvidia’s efforts to revive sales in China succeed? The answer could depend on political considerations. During the quarter, after Huang met with President Donald Trump, Nvidia hinted it may get U.S. licenses to ship the H20 chip to China.

Indeed the president “changed his mind in August and allowed H20 sales to resume after Huang visited the White House and pledged to give the federal government a 15% cut of AI-chip revenue earned in China,” the Journal reported.

Meanwhile, Nvidia took $4.5 billion in writedowns because of the lack of sales and said the H20 would have added $8 billion in second-quarter had the company been able to sell them, CNBC noted. Kress told investors Nvidia could generate between $2 billion and $5 billion in H20 revenue during the current quarter if the geopolitical environment permits.

Nvidia’s Slowing Revenue And Stock Price Growth

Nvidia’s stock price growth depends on the company’s ability to grow faster than investors expect. The company’s growth and stock price have slowed down in parallel.

How so? In 2023, Nvidia revenue was up 126%, according to Macrotrends, while the stock soared 242%, noted Google Finance. In 2024, the company’s revenue increased 113% while its stock price rose 188%. In the latest quarter, the company’s revenues increased 56% and the stock has risen 29% so far this year.

This suggests the stock will keep going up more slowly unless Nvidia can grow much faster. However, if the company resumed growing at 100% a year, revenue would soar from $176 billion in the last year to $360 trillion in 2036.

Sadly, such growth is impossible unless Nvidia targets new – much larger markets. After all, the global market for semiconductors is around $600 billion – much smaller than the gigantic 2036 revenue figure based on 100% average annual growth for the next decade.

What Could Slow Nvidia’s Data Center Demand

Will Nvidia’s data center growth decelerate significantly? The answer depends on whether companies remain as eager as they now appear to be to use AI chatbots.

For instance, enterprise technology spending grew 75% to $4.9 trillion in 2024 while large technology companies boosted AI capital expenditures from $245 billion in 2024 to $320 billion in 2025, according to Computerworld.

Unfortunately, returns on that investment have been elusive with 95% of companies surveyed having received no return on their AI investment. Only 5% of companies generated returns on AI – which averaged 3.7 times what they invested, noted a report from the MIT NANDA Institute.

If the economy contracts due to rising tariff-induced inflation, will companies keep spending so much on AI if they are not getting any return on their investment? How long would such a slowdown take to reduce Nvidia’s data center revenue growth even more?

Investors see some upside in the stock. Nvidia’s shares could rise about 14% to reach the average price target of $205 per share set by 31 analysts covered by TipRanks.

In my view the biggest potential for upside would happen if the Chinese market reopens for Nvidia. Unfortunately, that market could continue to be a political football.

Unless Nvidia can find new growth opportunities, the best days of owning its stock may be in the rear view mirror.