Nvidia: AI Stock to Dominate?
Source: fool.com
Megacap technology companies have been big movers in the stock market during 2025. One of the hottest artificial intelligence (AI) stocks is Nvidia, which has struggled this year. The graphics processing unit (GPU) king's market capitalization peaked early this year at nearly $3.7 trillion, but a slide that bottomed out in April cut about $1.4 trillion off its value. However, Nvidia stock has rebounded and almost fully recovered from that decline.
Nvidia's Market Cap Fluctuations
The volatility in the stock in January and February was triggered by the emergence of Chinese AI start-up DeepSeek. Initial reports took DeepSeek management at its word when it asserted that it had developed its R1 model at a low price relative to competing AI models, using older Nvidia chip architectures not widely used by U.S. developers. This caused questions about how essential Nvidia's GPUs would be for AI development, and whether demand for its new Blackwell series of chips would be as strong as projected.
As more information about DeepSeek emerged, it became clear that the company may not have been entirely upfront about how it trained its model, or the real cost. Investors recognized that DeepSeek might not represent a major threat to Nvidia's business. Yet its shares continued to slide.
Throughout March, investors guessed whether President Donald Trump would impose heavy tariffs on America's trading partners. On April 2, Trump unveiled new tariffs on goods imported from nearly every country. His threatened tariffs on China, a market that Nvidia relies on for growth, were particularly high. Afterward, Nvidia sank to its 2025 low.
Reasons for Investor Enthusiasm
Investors appear to have hopped back onto the Nvidia train over the last several weeks. Developments in trade negotiations between the U.S. and China may have eased investor tension. Nvidia's management recently notified investors that the company will be excluding China from its financial guidance. Earlier this year, executives from Oracle, OpenAI, and SoftBank met at the White House to announce the Stargate Project, a large-scale infrastructure initiative. The members of the joint venture intend to invest $500 billion over four years into U.S.-based data centers and other infrastructure to support AI. Nvidia was named as a key technology partner in the project, along with Microsoft, Arm, Oracle, and OpenAI. The Kingdom of Saudi Arabia and the United Arab Emirates have begun their own Stargate-like initiatives, in which Nvidia has become involved.
Nvidia's Diversification
Nvidia has been diversifying its ecosystem for years. Nvidia developed a software platform called CUDA that allows developers to program its GPUs for specific uses and get the most out of their parallel-processing power. This has helped Nvidia become an end-to-end service provider for AI developers, as it offers hardware and software. Nvidia has made investments in AI infrastructure leaders CoreWeave and Nebius Group. Nvidia is moving beyond designing hardware and software to become a critical player in AI data center construction. It has become a full-stack provider of AI services. Nvidia's management has suggested that the company might use some of its earnings to make acquisitions in areas such as robotics or autonomous driving to diversify its business beyond its GPU and data center operations.
Current analyst sentiment surrounding Nvidia stock suggests that shares could be headed for a breakout. With a market cap of more than $3.5 trillion, Nvidia has been trading the title of world's most valuable company back and forth with Microsoft. The trends fueling AI infrastructure investment and Nvidia's efforts to expand beyond chip design are reasons the company will continue rising in value and sustain its lead over peers.