In the past few years, NVIDIA Corporation (NASDAQ:NVDA) has been one of the most-covered stocks in the media as analysts and experts give their take on the undisputed engine of the AI revolution. A lot of this analysis has been dedicated to the graphics processing power of the company and how it has helped turn it into a corporation valued at around $5 trillion. In recent months, despite delivering quarterly revenues of more than $81 billion and tripling the net income, NVIDIA stock has entered a period of consolidation. As earnings continue to skyrocket, the Forward P/E multiple has compressed to around 22x. The share price has hovered between approximately $205 to $212 since November last year.

It is very hard to pin this compression to a fundamental weakness in the NVIDIA Corporation (NASDAQ:NVDA) business. Rather, it points to a phenomenon in finance known as multiple compression. This occurs when investors become less willing to pay a premium for the earnings of a particular stock. In the case of NVIDIA, this may be connected to the absolute dominance of the firm in the chip universe that is now being met with deep skepticism from a market divided on whether the AI hardware boom is a sustainable structural shift or a classic, cyclical semiconductor bubble. This article will aim to highlight the factors behind the shifting sentiment around NVIDIA stock on Wall Street since late 2025.

The Clashing Philosophies of Wall Street 

In order to understand NVIDIA Corporation (NASDAQ:NVDA), it is important to start with the premise that treating it as a mere hardware manufacturer is a fundamental misunderstanding of the business model on which the company operates. Bullish analysts argue that the true competitive moat of the firm is not actually the physical graphics processing units anymore, but the proprietary software ecosystem, known as CUDA. For over fifteen years, developers, researchers, and enterprise software engineers have built their AI models, scientific libraries, and database optimization workflows exclusively on top of CUDA. Switching to rival hardware from competitors introduces translation inefficiencies and software re-engineering costs.

This deep developer lock-in gives NVIDIA Corporation (NASDAQ:NVDA) an almost iron grip on the high-performance computing industry. On the GPU and AI side, the same bulls contend that even as Big Tech demand for chips may be peaking, NVIDIA has several other growth engines, in addition to software, that will step in to fill the gap. These include the rise of Sovereign AI, with deals like the buildout of the Vera Rubin AI Factory in Japan, alongside partnerships in physical AI, robotics, and edge computing. The important point here is that nation-states and heavy industrial giants are lining up to buy NVIDIA hardware. For bulls, this paths to a diverse customer base and a looming multi-decade monopoly.

From a growth perspective, NVIDIA Corporation (NASDAQ:NVDA) itself has charted a path to an entry in the market of CPUs. With the custom ARM-based Vera CPU paired with Rubin GPUs, management is targeting a $20 billion standalone CPU business. This essentially threatens the core data center businesses of rivals like Intel and AMD. However, it remains to be seen whether enterprise customers will adopt these integrated superchips or continue to prefer pairing standard x86 processors with NVIDIA GPUs. If the market resists this integration due to existing software legacy systems or a desire to avoid total vendor lock-in, the firm could face high development costs and underutilized chip designs.

For skeptics who doubt NVIDIA Corporation (NASDAQ:NVDA) can deliver on the bull promises, there are three main issues. Big Tech share in NVIDIA revenues, the threat of custom silicon, and the geopolitics surrounding AI and chips. Major cloud providers are engaged in a dilemma, spending hundreds of billions of dollars on data center buildouts. However, the software-level revenues generated from enterprise generative AI tools and consumer subscriptions have yet to scale to match this level of capital expenditure. If cloud giants do not see a clear, near-term path to monetizing these investments, they will inevitably slash their infrastructure budgets, causing the order backlog of NVIDIA to evaporate rapidly.

To bypass NVIDIA Corporation (NASDAQ:NVDA) steep premium pricing and reduce their long-term operational costs, the same Big Tech companies like Google, Amazon, and Meta are rapidly designing their own specialized application-specific integrated circuits for internal workloads. While these custom chips may not match the general-purpose flexibility offered by NVIDIA models yet, they are highly optimized for specific tasks like high-volume model inference. Over time, custom internal silicon will inevitably erode the NVIDIA market share among the largest chip buyers, forcing a contraction in operating margins. Google is doing this with TPUs, Amazon with Trainium, and Meta with the custom MTIA chips.

Geopolitics and trade regulations represent the final, highly unpredictable variable. Advanced AI silicon is treated as a critical national security asset, making NVIDIA Corporation (NASDAQ:NVDA) a frequent target for export controls and international trade disputes. The company has had to dedicate significant engineering resources to designing lower-performing, lower-margin chips specifically for the Chinese market to comply with trade laws. Moreover, because NVIDIA manufacturing is highly centralized in Taiwan, any escalation of geopolitical tensions in the Taiwan Strait, which does not look likely right now, presents an existential risk to the physical supply chain of the US-based AI giant.

The Numbers Never Lie

The earnings report of NVIDIA Corporation (NASDAQ:NVDA) can answer some of the questions raised by bears. In the first fiscal 2027 quarter, the company posted a record revenue of $81.6 billion, reflecting an 85% surge from the previous year. This growth was powered entirely by the Data Center division, which hauled in a record $75.2 billion as cloud hyperscalers, sovereign nations, and enterprise clients rushed to secure advanced computing nodes. Furthermore, the firm managed to sustain a non-GAAP gross margin of 75%. These figures strongly reinforce the bullish core narrative, proving that the AI behemoth still commands pricing power and that CUDA platform remains a barrier to entry for prospective hardware rivals

Underneath the Data Center figure was a key transformation. The Data Center networking revenue surged 199% year-over-year to $14.8 billion, proving that connecting AI clusters via InfiniBand and Ethernet is becoming as vital a business as the GPUs themselves. The Edge Computing revenue – comprising Gaming, ProViz, and Automotive – was $6.37 billion, growing 29% year-over-year. This growth was driven by standard Blackwell demand and automotive. Crucially, NVIDIA achieved these record earnings while absorbing a complete regulatory lockout in key geographies. During the earnings call, the CFO explicitly highlighted that no shipments of Data Center compute products to China occurred during the quarter.

For context, China represented $4.6 billion in revenue during the same quarter last year. NVIDIA completely replaced that multi-billion-dollar gap via Western hyperscalers, sovereign AI enterprise builds, and Tier-2 cloud providers. The guidance provided by management indicates the momentum is not slowing down for the summer quarter. Revenue guidance was projected at $91 billion, up almost 2%. Gross margins are expected to hold steady at 75.%. NVIDIA CEO Jensen Huang confirmed that the next-generation platform, Vera Rubin, remains firmly on track for second-half sampling, with early cycles beginning as soon as Q3. The firm returned $20 billion to shareholders in Q1 and authorized an additional $80 billion for future repurchases.

Theories about the success and failures of NVIDIA Corporation (NASDAQ:NVDA) will continue to dominate the media headlines for years to come, but the underlying numbers will continue to provide investors with the foundation on which to build their investment thesis. The latest earnings from the company do exactly that, highlighting that the firm is navigating the annual hardware releases effectively, convincing the market to adopt the new integrated CPU architectures, and diversifying the customer base into sovereign AI and physical robotics. The position of the firm as a bedrock of modern computing remains safe for years to come, even as the stock transitions into a reasonably priced compounder.

Is the Smart Money Still Flowing Into NVIDIA?

According to a database tracking the activity of more than 1,000 hedge funds, maintained by Insider Monkey, NVIDIA Corporation (NASDAQ:NVDA) was the fourth-favorite stock for billionaire investors at the end of the first quarter of 2026. 53 billionaires, of the 107 tracked by Insider Monkey, held a stake in the company at the end of March 2026. In the previous quarter, this number had been 49. The firm also remains popular among hedge fund managers. 275 funds tracked by IM held a stake in the company at the end of the first quarter of 2026, up from 264 in the fourth quarter of 2025. Fisher Asset Management has the largest position worth more than $15.4 billion, followed by Citadel Investment Group and Arrowstreet Capital.

While we acknowledge the risk and potential of NVDA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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