Nvidia Fundamental Analysis: Nvidia Pulls Back From Recent Highs Despite Strong Results and Robust AI Guidance

Although the company could generate close to $100 billion in cash this year, management chose to redirect a substantial portion of those resources toward expanding capacity, developing new chips, and strengthening its data center infrastructure. This strategy aims to consolidate its leadership in the structural AI cycle, but it also implies higher spending commitments in an increasingly competitive environment.

In terms of guidance, Nvidia projected fiscal first-quarter revenue of $78 billion (+/-2%), well above the consensus estimate of $72.6 billion. The outlook confirms that demand for accelerated computing solutions and specialized chips remains robust, driven by major technology companies that continue expanding their infrastructure for advanced generative AI models and large language model training.

Companies such as Meta Platforms have signaled capital expenditures of at least $630 billion in 2026, primarily focused on data centers and high-performance processors. These commitments reinforce the narrative that the AI investment cycle remains in an expansionary phase, with intensifying competition for computing capacity and access to next-generation chips.

From a valuation standpoint, Nvidia currently trades at a forward P/E multiple of 24.5x, down from 34.6x at the end of October, when it reached a market capitalization close to $5 trillion. This multiple compression suggests a moderation in expectations, although the company remains one of the most relevant assets in the global technology universe.

Compared to its peers, the stock trades at a relative discount to Advanced Micro Devices (28.8x) and at a significant discount to Intel (81.4x). However, the market is pricing in intensifying competition in specialized AI chips over the coming quarters, both from traditional manufacturers and from in-house developments by major technology firms.

The recent decline also reflects concerns about the sustainability of the current pace of investment in artificial intelligence. While revenue growth has been exponential, some investors question how long these expansion levels can be sustained before demand normalizes or margins come under pressure from higher infrastructure and energy costs.

Additionally, the market is assessing the balance between growth and profitability. The decision to prioritize reinvestment over large-scale buybacks or dividends reinforces Nvidia’s positioning as a company in a strategic expansion phase, closer to a “growth compounder” profile than to an immediate capital-return approach. This dynamic may generate short-term volatility, especially after strong gains have accumulated.

In conclusion, Nvidia’s correction does not stem from operational weakness, but rather from a recalibration of expectations following solid results and ambitious guidance. The company remains at the center of the global AI investment cycle, supported by a strong demand pipeline and strategic clients. However, the market is demanding evidence that the current AI boom is sustainable over the long term and can translate into structural profitability, which could keep volatility elevated in the short term despite solid long-term fundamentals.