Demand for AI chips continues to drive rapid growth at Nvidia, but investors are still weighing the company’s cyclical track record, the sustainability of its margins and whether data-centre investment can hold up. Nvidia shares fell 4.22% on October 30 to $204.64, about 15% below their record high earlier this month. Despite the recent pullback, revenue growth has accelerated, and management expects sales to rise 89% year over year in the upcoming third quarter.
Nvidia’s revenue has not grown in a straight line
Nvidia is now a major supplier of AI accelerators and related hardware, with a business far larger than its former core market of gaming graphics cards. Its past results, however, show that revenue growth can turn. After three consecutive years of 20% to 40% growth, revenue fell 7% in fiscal 2020, which ended in January 2020—before the United States introduced widespread pandemic shutdowns.
Revenue then climbed 53% and 61% in the following two fiscal years, before growth stalled in fiscal 2023. The current AI-driven expansion is strong, but it has not removed concerns about a possible turn in the cycle. Shares fell initially after four of the company’s last five quarterly earnings reports, underscoring that market reactions depend not only on reported results but also on expectations and valuation.
Margins and the durability of AI spending are in focus
Nvidia’s net margin over the past 12 months was about 64%, while its adjusted net margin was roughly 41%—around four times the level of a decade ago. Those profits generate substantial cash, but leave less room for further margin expansion. If costs rise or competition intensifies, earnings may no longer grow faster than revenue.
Investors are also questioning whether the current pace of AI infrastructure construction can continue. Data-centre expansion has faced opposition in some locations. Financing arrangements involving Nvidia and other companies to help customers fund AI investment have also drawn attention to the stability of the money flowing through the sector. Capital spending by major technology companies is under scrutiny this earnings season. If customers slow their build-outs, demand for chips and the broader investment cycle could be affected.
Management forecasts 89% revenue growth next quarter
Nvidia’s recent share performance has diverged from its revenue trajectory. Year-over-year revenue growth rose from 56% in the second quarter of fiscal 2026 to 63% in the third quarter, 73% in the fourth quarter, and then 85% and 106% in the first and second quarters of fiscal 2027. The company expects growth to moderate in the third quarter, but still forecasts an 89% increase. Results are due on November 17. Analysts also expect earnings growth to remain strong, at a broadly similar level.
On valuation, Nvidia trades at about 13 times forecast earnings for the next year. Some bears point to memory-chip companies, whose shares have outperformed Nvidia this year and whose forward price-to-earnings multiples are in the mid-single digits. Those companies, however, also face substantial swings in earnings over the cycle. Nvidia’s board recently approved a $150 billion share-repurchase authorization, reflecting the company’s cash generation and providing a framework for returning capital to shareholders.
Shares retreat as growth and risks coexist
Nvidia’s share price has risen about eightfold over the past five years, a period that included the slowdown in fiscal 2023. Its return so far this year has been broadly in line with the overall market. Sentiment is now more cautious: shares have pulled back from this month’s high, while the company’s revenue has yet to show a comparable slowdown.
A moderation in revenue growth is difficult to avoid over time, and margin pressure is a tangible risk. At the same time, Nvidia’s business scale and expected results continue to draw investor attention even if growth slows materially. The November 17 results will offer a fresh measure of demand, while customer data-centre spending and the company’s profitability remain key areas to watch.