NVIDIA’s AI Dominance Faces Near-Term Hurdles: Why Profits Could Miss Street Expectations
6min read NVIDIA (NASDAQ: NVDA), the undisputed leader in AI infrastructure, has become the poster child of the generative AI boom, with its data center revenue soaring 93% year-over-year in late 2024. Yet, a growing chorus of investors and analysts are cautioning that the company’s Q1 FY2026 (ending April 2025) results could disappoint, citing supply chain bottlenecks, slowing growth, and emerging competitive threats. “NVIDIA’s Blackwell GPU rollout faces execution risks that could temporarily weigh on near-term revenue,” warns Mizuho analyst Vijay Rakesh, who still rates the stock as “Outperform” but highlights a critical inflection point for the company.
The Case for a Near-Term Miss: Key Risks to Watch
1. Blackwell’s “Growing Pains”
NVIDIA’s new Blackwell GPUs, designed to power advanced AI models, are central to its $43 billion Q1 revenue guidance. However, production complexities and supply chain challenges could delay their ramp-up. “The Blackwell’s advanced connectivity and power requirements mean scaling won’t be linear,” Rakesh explains. Compounding this is geopolitical friction: U.S.-China trade tensions could disrupt shipments to key markets.
The data shows a deceleration from 262% in Q1 FY2025 to an expected 65% in Q1 FY2026—a stark slowdown even as growth remains robust.
2. Slowing Revenue Surprises
NVIDIA’s ability to beat estimates has weakened. Over the past four quarters, revenue exceeded guidance by 9%, 7%, 8%, and 5%, respectively—a trend signaling a transition from hyper-growth to normalization. “Investors are used to outsized upside, but that’s fading,” notes analyst Joseph Moore of Morgan Stanley. With Q1’s $43 billion target, even a 2% miss could disappoint, especially as peers like AMD and Intel close gaps with new AI chips.
3. AI Spending Pullback and Computing Oversupply
U.S. tech giants are reining in spending. Microsoft, for example, has reportedly canceled over 2GW of data center leases, citing sufficient existing capacity. Meanwhile, China’s DeepSeek AI, which matches ChatGPT’s performance using older NVIDIA H800/H200 chips, threatens to reduce demand for cutting-edge hardware. “If companies can achieve results with cheaper, older GPUs, why rush to buy Blackwell?” asks one hedge fund manager.
The chart highlights NVIDIA’s 15% underperformance compared to broader tech gains, reflecting investor anxiety about these risks.
The Long-Term Bet Remains Intact—but Near-Term Volatility Looms
NVIDIA’s dominance in AI infrastructure remains unshaken. Its CUDA ecosystem, data center partnerships (e.g., AWS, Microsoft Azure), and $35.6 billion in Q4 data center revenue underscore its leadership. “The long-term thesis is intact,” says Evercore’s Mark Lipacis. “But investors must differentiate between NVIDIA’s decade-long AI narrative and the short-term execution hurdles.”
Yet, valuation risks loom. NVIDIA trades at a 17.7x price-to-sales ratio—far above peers like Microsoft (10x) or Tesla (4.8x)—despite slowing growth. If revenue growth dips below 50% YoY, the stock could face a valuation reset.
Conclusion: A Stock at a Crossroads
NVIDIA’s Q1 results will be pivotal. Analysts project $0.92 EPS and $43.1 billion in revenue, but execution risks and a shifting market landscape could lead to disappointment. Key metrics to watch:
- Blackwell shipments: Any delays in data center adoption could pressure margins.
- Competitor activity: AMD’s MI300X and Intel’s Habana Gaudi 3 threaten to eat into NVIDIA’s lead.
- China dynamics: Geopolitical friction and local AI advancements (e.g., DeepSeek) could limit market share.
For now, the consensus remains bullish (89% “Buy” ratings), with an average price target of $165.48. However, the path to that target hinges on overcoming near-term headwinds. Investors should brace for volatility as NVIDIA navigates this critical phase—its ability to balance long-term AI leadership with short-term execution could define its trajectory for years to come.
The data shows margins dipping to 70.6% in Q1 FY2026—down from 73% in Q4 FY2025—as cost pressures mount, further underscoring the need for flawless execution.
