Nvidia Stock: 3 Reasons Why It Might Underwhelm After Feb. 26

Nvidia (NASDAQ: NVDA) has been a standout performer in the tech sector, with its stock price surging on the back of strong earnings and growth prospects. However, investors should be aware of three specific reasons why Nvidia's stock might underwhelm after Feb. 26.



1. Supply constraints and demand outstripping supply: Nvidia has been facing supply constraints on both its Hopper and Blackwell architectures, which are expected to persist for several quarters in fiscal year 2026. This supply constraint could limit revenue growth in the near term, as demand for Blackwell is projected to outstrip supply for several quarters. While this constraint is likely to be temporary, it may impact Nvidia's earnings in the short term.
2. Geopolitical risks and export controls: The ongoing US government export controls on certain products to China and other regions pose a significant risk to Nvidia's sales. While the company has been mitigating this impact by developing new, unrestricted products, the long-term effects remain uncertain. Geopolitical tensions and export controls could limit Nvidia's growth potential in certain markets, potentially impacting earnings.
3. Potential pricing pressures or increased production costs: Despite strong revenue growth, Nvidia's gross margin declined sequentially due to a mix shift from H100 systems to more complex and higher-cost systems within the Data Center segment. This suggests potential pricing pressures or increased production costs, which could impact profitability and stock performance. While Nvidia is working to address these issues and improve production yields, the long-term impact on earnings is expected to be minimal.



Investors should carefully consider these factors when evaluating Nvidia's long-term investment potential. While the company's strong position in the AI market and commitment to share repurchases signal confidence in future growth, the short-term challenges and risks should not be overlooked. As always, it is essential to conduct thorough research and consult with a financial advisor before making any investment decisions.

In conclusion, while Nvidia's stock has been a strong performer, investors should be aware of the potential challenges and risks that could impact the company's earnings in the long term. By understanding these factors, investors can make more informed decisions about their investments and better navigate the market's ups and downs.