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In the world of artificial intelligence (AI) stocks, Nvidia (NASDAQ:NVDA) is often the first company investors think of as pure-plays in this high-growth space.
There’s good reason for this. Nvidia’s high performance chips power essentially all of the current AI development we’re seeing at home (and much of what’s being done abroad). That’s simply because Nvidia has focused on making the highest-performance chips on the market, and these are specifically the most in-demand chips for companies looking to build out their own large language models or internal AI applications to drive operating efficiencies.
This is a massive market, and it continues to grow by leaps and bounds. Investors are clearly pricing in tremendous growth moving forward. So, with that backdrop, let’s dive into what this could mean for Nvidia moving forward in terms of both tailwinds and headwinds in the years to come.
Key Tailwinds to Consider
Nvidia CEO Jensen Huang
Picking just two tailwinds for Nivdia is difficult, considering the fact that this is a company that appears to be firing on all cylinders. Indeed, the company’s dominance in the world of data centers, cloud infrastructure and almost all high-performance computing markets is impressive.
That said, I think the company’s rollout of its upcoming Rubin chips could be absolutely transformative for both Nvidia and the industry as a whole. Hyperscalers are demanding the biggest and best chips, and these Rubin chips are expected to deliver multiple times as much power as its current next-generation chips on the market (its Blackwell GPUs), which are selling very well by the way. If the sort of AI workloads many investors expect to see materialize, there’s simply one chip most companies will look to build on top of, and that’s the upcoming Rubin chip. Expected to be released next year, this will likely be a central driver of Nvidia’s persistent market share (and potentially even growth) throughout the coming year.
Another key tailwind I think is important to touch on is the current dominance of Nvidia’s chip lineup. Its newest Blackwell GPU platform integrates seamlessly with Nvidia’s CUDA ecosystem, making it very costly for the company’s clientele to switch to other platforms. That’s a key point I don’t think gets enough attention – Nvidia buyers are essentially “locked into” the Nvidia ecosystem at a certain point, as switching would be even more costly than simply buying more chips. And with the company’s existing Blackwell and Hopper chips still dominating in terms of share and usage among both domestic and international clients (with other model chips produced for key markets like China), Nvidia really has found a way to penetrate the world stage.
The Key Red Flag to Watch in 2026
A red flag
I think 2026 could be the year where valuations start to matter once again. I say that, and I actually think that based on Nvidia’s current growth rate, this stock is very cheap at just 22-times forward earnings.
Now, the question of course will be whether the forward growth expectations currently priced in by the market play out. But if Nvidia is able to achieve its growth estimates for the coming year, and come in line with 2027 earnings expectations as well, this is a stock that very likely has much more upside ahead. That’s the risk for any investor trying to talk about Nvidia’s valuation absent some sort of significant event driving growth expectations significantly lower. Emphasis on the word significantly.
That said, I do think the key red flag for investors to watch is whether or not we get any sort of indication from the market that mega-cap tech companies are intent on dialing back their AI spending over any time frame. Indeed, this AI spending trajectory is being projected by many in the market to essentially continue for decades. But there are some in the market who believe that at some point, these models will be built and can likely be sustained on current chip supply. If that’s the case, then companies like Nvidia developing the latest and greatest chips may not have the stranglehold on the semiconductor they once did – chips with lower performance could take more market share.
We’ll see if such a scenario plays out, and I’m not saying that’s my base case. But I do think some concern around this potential reality in the future is driving Nvidia’s relatively low multiple right now, so it’s something to watch.