Nvidia’s Growth Slows: Peak Demand Concerns and Rising Competition Challenge Tech Giant

Nvidia’s Growth Slows Amid Concerns of Peak Demand and Increased Competition

Nvidia, the tech giant known for its GPU chips, is facing a potential slowdown in its meteoric rise, according to recent reports. Despite an impressive 1,776% stock gain over the past five years, the company’s Q4 revenue growth rate hit its lowest point in nearly two years, causing a 6% drop in stock price following the earnings announcement.

Gil Luria, a tech analyst at DA Davidson, suggests that Nvidia may have reached the zenith of its growth trajectory. While acknowledging the company’s strong execution of its strategy, Luria expressed concern about the deceleration in growth. Nvidia’s fiscal year 2025 revenue more than doubled year-over-year to $130.5 billion, but the pace of growth is showing signs of slowing.

One factor contributing to this slowdown could be peak demand from major customers. Tech giants like Microsoft, Meta Platforms, and Amazon, which account for over one-third of Nvidia’s revenue, may have reached their spending ceiling on GPU chips. This situation raises concerns about potential oversupply and decreased demand as companies reassess their return on investment in AI technologies.

Adding to Nvidia’s challenges is increased competition from Chinese companies. Reports indicate that Chinese labs are now using GPU chips from Huawei, signaling growing regional competitiveness. This development, coupled with potential restrictions on sales to China, could further pressure Nvidia’s market position.

Profit margins are another area of concern for the company. Nvidia’s frequent releases of new GPU chips lead to fluctuations in profit margins. For the first quarter, the company expects a gross profit margin of about 71%.

Despite these challenges, Luria maintains a “Neutral” rating on Nvidia stock with a $135 price target. The market’s reaction to these developments was evident as Nvidia shares declined by approximately 4% to $126.49 following the earnings release.

As Nvidia navigates this new landscape of slowing growth and increased competition, industry observers will be closely watching how the company adapts its strategy to maintain its dominant position in the GPU market.