ewsba.se
Written by Will Healy for The Motley Fool->
The market has offered no indication that an AI slowdown is coming soon.
Nvidia may have limited downside since it looks increasingly like a value stock.
When looking at the recent earnings increases from some of the most prominent growth stocks, the effect of artificial intelligence (AI) is nothing short of spectacular. Although such numbers do not reflect the entire company, Microsoft reported 40% Azure cloud growth yearly, and 63% for Google's parent company, Alphabet.
For now, most of that growth depends on AI and, by extension, the AI accelerators designed by Nvidia (NASDAQ: NVDA). That fostered 65% revenue growth for the company in fiscal 2026 (ended Jan. 25).
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Nonetheless, as longtime chip-stock investors know, the industry is cyclical, and an eventual downturn is inevitable. Thus, a question for investors is what happens to Nvidia stock if AI growth slows down? Let's take a closer look.
Nvidia headquarters. Image source: Nvidia.
Ultimately, what happens to the chipmaker's stock if AI growth ultimately slows is anybody's guess. However, the answer is likely to vary between little change and a mild bear market, defined as a pullback of 20% or more.
That answer may surprise investors who have seen the stock rise by almost 1,600% from its October 2022 low. Also, many other semiconductor companies are making AI chips of their own. While that may not challenge its leadership, it could reduce its market share.
Nonetheless, the argument for a relatively modest pullback makes more sense when looking at the overall financials. Investors have to remember that its size is already creating headwinds for the stock.
Nvidia's market cap is around $4.8 trillion as of the time of this writing, the highest in the stock market. This means a doubling of its value takes its market cap to $9.6 trillion, a huge feat when no company has yet reached $6 trillion. That mathematical reality could discourage investors looking for another 1,600% increase.
Consequently, despite 65% revenue growth, it sells at a trailing price-to-earnings ratio (P/E) of 40 and a forward earnings multiple of just 24. This means that if Nvidia's stock loses 25% of its value over the next 12 months, its P/E would presumably fall to 18, possibly taking it into value stock territory.
For that earnings multiple to make sense, AI growth would have to nearly come to a halt, a scenario that appears highly unlikely in today's market. For this reason, long-term investors are likely to see any slowdown as a cyclical event rather than any occurrence that hurts the stock's long-term thesis.
Ultimately, AI growth will slow eventually, and it could have a mildly negative effect on the stock. Knowing that, investors might even have good reason to not buy Nvidia right now.
However, this possibility does not justify selling. For one thing, at least for now, AI growth is holding its own, as evidenced by Microsoft's and Alphabet's results.
Moreover, Nvidia's valuation is likely on the way down, so much so that it will probably limit the downside of the stock should an AI slowdown occur without warning. Hence, if investors already own the stock, they are likely best off holding their position.
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $473,985!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,204,650!*
Now, it’s worth noting Stock Advisor’s total average return is 950% — a market-crushing outperformance compared to 203% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of May 7, 2026.
Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
This data feed is not available at this time.