The Nvidia (NASDAQ: NVDA) share price is up and down at the most effective of occasions. Currently although, it’s clicked into the next gear of volatility.

On the finish of January, it plunged 17% in at some point because of considerations about DeepSeek R1, an open-source Chinese language massive language mannequin purportedly educated on much less highly effective chips and a shoestring finances. Then it surged 20%, earlier than slumping 14% over the previous week.

What’s happening right here? Let’s have a look.

Eye-popping progress

Over the previous two years, Nvidia has reported blowout quarterly earnings outcomes. This has typically wowed buyers and the share price has soared in response to every report (up 400% in two years!).

Nonetheless, for the reason that AI chipmaker reported its This fall and monetary 2025 outcomes on 26 February, the response has been totally different. The inventory hasn’t risen sharply. The truth is, it fell 8.5% yesterday (27 February).

At first look, this might sound complicated. Full-year income skyrocketed 114% 12 months on 12 months to $130.5bn, whereas earnings per share surged 147%.

Importantly, demand for Nvidia’s newest Blackwell chips is “wonderful“, in line with administration. Blackwell delivered $11bn in income in This fall, the corporate’s quickest manufacturing implementation ever.

CEO Jensen Huang stated: “We’ve successfully ramped up the massive-scale production of Blackwell AI supercomputers, achieving billions of dollars in sales in its first quarter. AI is advancing at light speed as agentic AI and physical AI set the stage for the next wave of AI to revolutionise the largest industries.”

Agentic AI could make clever choices in software program with out human supervision, whereas bodily AI extends this functionality to the true world, enabling machines and robots to carry out duties independently.

This exhibits how Nvidia’s GPUs have an extremely wide selection of functions — gaming, robots, self-driving automobiles, the multiverse, and extra. I discover this optionality extremely engaging.

Valuation

In contrast to Palantir, an AI inventory that’s nonetheless very extremely valued even after a 30% fall, Nvidia’s present valuation appears low-cost on some metrics.

The ahead price-to-earnings (P/E) ratio, for instance, is simply 27. For context, Apple‘s ahead P/E a number of is 32, regardless of the iPhone maker rising within the single digits.

In the meantime, the P/E-to-growth (PEG) ratio, which elements in Nvidia’s anticipated progress, is under one. On this foundation, the inventory appears nice worth.

AI spend

Nonetheless, it’s value asking why the market isn’t affording the inventory the next premium. Some buyers are apprehensive that the present fee of capital expenditure on AI infrastructure is unsustainable. I feel that is the principle medium-term threat right here.

Microsoft, for example, nonetheless plans to spend over $80bn on AI in its present fiscal 12 months (which ends in June). But it lately stated it “might strategically tempo or alter our infrastructure in some areas“. Is {that a} trace of what’s to come back? Solely time will inform, but it surely’s value contemplating.

In the end, ongoing spending on AI will rely upon rising buyer demand and tangible returns. Buyers haven’t began to demand proof that the hefty AI spend is value it but, however that can occur. We all know that OpenAI continues to be shedding cash even on its $200-per-month ChatGPT Professional subscriptions!

Nvidia inventory is down 20% from its all-time excessive and is flat over eight months. However I feel it might fall additional this 12 months, so I’m ready a bit longer earlier than I think about investing.