Should You Buy or Sell Nvidia Stock?

Nvidia (NVDA) has emerged as a top-performing stock in the market over the last two years, driven by various factors. With the company's extensive growth, the question arises: Is Nvidia stock still a wise investment at its current price, or is it time for shareholders to cash in on their profits?

There are compelling arguments for both buying and selling the stock.

The Case for Selling: What Lies Ahead for Demand?

Nvidia's impressive rise is closely linked to the growing demand for artificial intelligence (AI) technology. The company produces graphics processing units (GPUs), which are exceptional at managing large-scale computing tasks. When connected in clusters, these GPUs can handle complex workloads at high speeds, aligning perfectly with what AI systems require.

As AI firms and cloud providers hurried to meet the increasing need for processing power, Nvidia's revenue surged dramatically. Over the past couple of years, the company's quarterly revenues have often seen year-over-year increases of up to three times. However, this rapid growth is beginning to slow, raising concerns about whether Nvidia can sustain these elevated sales figures.

As companies ramp up their AI infrastructure, there may come a point when demand levels off. If that happens, Nvidia’s sales could significantly drop, as clients would only buy replacements or expand their capacity slowly. This potential decline is troubling, especially considering that Nvidia’s recent revenue levels are much higher than in the past.

This situation also illustrates the cyclical nature of the semiconductor industry. Nvidia has experienced several boom-and-bust phases throughout its history. If interest in AI products diminishes, current investors could face challenges.

The Case for Buying: Strong Demand Expected Beyond 2025

GPUs have a typical lifespan of three to five years, meaning that companies enhancing their computing infrastructure will frequently need to invest in new hardware to maintain their capabilities long-term.

With two years already into the AI expansion, many businesses are still scaling up their computing resources, indicating that 2025 could also be a year of solid demand. By 2026, the natural replacement cycle for newer GPUs could further strengthen the market. Moreover, there could be additional incentives for businesses to upgrade their systems.

The advanced chips used in Nvidia’s GPUs are manufactured by Taiwan Semiconductor Manufacturing (TSMC), a company consistently pushing innovation. TSMC's upcoming N2 process is projected to offer 25% to 30% better energy efficiency than previous generations, which is key for server farms monitoring operational costs. Even if companies don’t need immediate processing upgrades, the efficiency improvements might encourage them to invest in newer models.

Alongside that, Nvidia is rolling out its Blackwell architecture GPUs, which promise four times the performance of the current Hopper architecture. This leap in technology may lead to further demand beyond 2026.

All these variables suggest that the market for Nvidia's products may stay strong for a while. Currently, the company’s forward price-to-earnings ratio of 45 indicates a high valuation, yet with the ongoing rapid growth, many investors find this valuation justifiable.

Ultimately, whether to buy or sell Nvidia stock should hinge on your perspective on the company's prospects through 2026 and beyond. With an array of catalysts in play, Nvidia's growth trajectory seems likely to continue. Therefore, I lean toward the view that buying Nvidia stock holds more promise than selling it at this moment.

Author holds positions in Taiwan Semiconductor Manufacturing. Author does not hold positions in Nvidia.

investment, Nvidia, stock