TL;DR
NVIDIA Corporations' NVDA 0.00%↑ just reported its Q3 earnings, and despite a beat and strong guidance, the stock was down before the market opened.
Could NVIDIA’s parabolic rise be over?
Have investors just become too demanding with this AI darling?
Or are there some real concerns here?
In this article, I’ll discuss NVIDIA’s earnings and future outlook in depth and then issue a Buy, Sell, or Hold recommendation based on these insights.
But first, a little bit about me, The Pragmatic Investor
An approach that assesses the truth of meaning of theories or beliefs in terms of the success of their practical application.
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Macro, Fundamentals and Technical.
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For long-term investing, there’s nothing better than understanding business cycles, macroeconomic trends and geopolitics.
On the other hand, when it comes to short-term moves in markets, the best tool we have is technical analysis.
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I actually recently designed my own algorithm, you can see it here:
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Q4 Earnings
Nvidia reported strong Q3 FY2025 results, with revenues of $35.1B (+94% YoY) and EPS of $0.81, beating estimates.Â
The growth was driven by its Data Center segment, which generated $30.77B (+112% YoY), fueled by demand for Hopper GPUs.Gaming and Automotive also showed growth but were less impactful.Â
Why The Sell-Off?
Despite the impressive performance, Q4 guidance of $37.5B fell short of buy-side expectations, and gross margins are projected to decline further to 73.5%. While Blackwell production is on track, concerns remain about long-term demand and competition from AI chipmakers.
With that said, NVIDIA is actually barely selling off, and I wouldn’t be surprised if we ended the day green.
There’s a lot that goes on with earnings, and the moves on the actual day can be detached from fundamentals.
With this in mind, let’s actually look at the fundamentals and answer the key question for investors here.
Is NVDA Still A Buy?
NVIDIA continues to perform well, no doubt, but does this mean investors should buy when the stock has already 10x in the last year?
In my opinion, investors should be aware of some key challenges the company faces right now.
Growth Slowdown
NVIDIA’s growth, while still strong, is showing signs of deceleration. In its Q3 earnings, the company reported a 90% year-over-year revenue increase, driven by AI chip demand, but this marked a slowdown compared to 270% growth in Q4 2022 and 120% in Q2 2023. Sequential growth has also declined, with a 17% increase from Q2 to Q3, and Q4 guidance suggests only a 7% rise.Â
The data centre segment dominates revenue growth, making NVIDIA increasingly dependent on this single business unit, which is an added risk.
Fall In Profitability
Gross margins, while robust at 75%, appear to have plateaued, limiting future profit growth. Operating income, which previously surged faster than revenue, is also growing at a slower rate
Competition
NVIDIA's dominant position in the AI chip market, controlling 70%-95% of sales, is increasingly threatened by rising competition and shifting industry dynamics. Rivals like AMD, Intel, and startups such as D-Matrix are developing alternative chips, aiming to offer cost-effective and specialised solutions, particularly for inference workloads, which require less powerful but efficient hardware.Â
NVIDIA’s flagship chips, priced at $30,000 or more, incentivise customers to diversify their suppliers. Hyperscalers and device makers are also exploring custom chips and decentralised technologies that could reduce reliance on NVIDIA's GPU-based clusters.Â
With the AI chip market projected to reach $400 billion annually, competitors are innovating to carve out market share, leveraging new architectures and trade-offs.Â
Although NVIDIA’s technological lead and integration of its CUDA software give it a strong moat, its CEO acknowledges the need for constant innovation to counteract the growing pressure and sustain its position in the rapidly evolving landscape.
Technical Analysis
And if we look at the chart, there are also some clear signs of exhaustion.
NVIDIA is struggling to grind higher as it meets resistance, and we can also see a HUGE divergence happening in the RSI, MACD and even On Balance Volume.
A bearish divergence occurs when an asset’s price reaches higher highs, but a technical indicator, such as the Relative Strength Index (RSI), forms lower highs. This signals weakening momentum despite rising prices and suggests a potential reversal or slowdown in the upward trend, warning of possible downside ahead.
Final Thoughts
NVIDIA remains a powerhouse in the AI chip market, consistently outperforming expectations and delivering robust growth, particularly in its data centre segment. However, signs of a growth slowdown, plateauing gross margins, and rising competition introduce risks that investors should not ignore.
The current valuation reflects high investor expectations, making the stock vulnerable to even slight underperformance or muted guidance. Additionally, technical indicators signal waning momentum, suggesting caution in the short term.
Recommendation: Hold
While NVIDIA's long-term potential in AI and data centres is strong, current risks and the lofty valuation make it less compelling as a buy at this time.Â
Holding allows investors to benefit from any upside while minimising exposure to near-term volatility. New investors may find better entry points as growth moderates and the market re-prices expectations.
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