Artificial intelligence spending is exploding, yet Nvidia Corp. (NASDAQ:NVDA) shares have cooled off. That disconnect is shaping the current Nvidia stock outlook and raising important questions for investors.
Big Tech companies continue to boost their AI infrastructure budgets. Still, Nvidia’s stock has barely moved in recent months, even as it remains one of the biggest beneficiaries of that spending wave.
Nvidia Shares Stall Despite AI Boom
Since the start of the fourth quarter, Nvidia shares have gained less than 1%. The stock has traded in a tight range after reaching a record high in late October. While it is slightly outperforming the S&P 500 to begin 2026, the momentum is nothing like prior years.
In 2025, Nvidia surged nearly 40%. That followed two straight years of triple-digit percentage gains. After such a historic run, a period of consolidation may not be surprising. However, the muted performance is notable given the massive capital expenditures planned by major technology firms.
Meta Platforms Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOGL), Microsoft Corp. (NASDAQ:MSFT), and Amazon.com Inc. (NASDAQ:AMZN) are projected to spend more than $600 billion on AI infrastructure in 2026. Nvidia’s data center GPUs have been central to those investments.
Yet the stock has not responded with fresh highs.
Capex Concerns Weigh on Sentiment
One explanation shaping the Nvidia stock outlook is growing skepticism about returns on AI spending. Investors are beginning to question whether revenue generated from AI services will justify the enormous capital outlays.
JoAnne Feeney of Advisors Capital Management noted that rising spending today could accelerate the timeline for market saturation. In other words, the more companies build AI infrastructure now, the sooner they may pause to digest that capacity.
That dynamic introduces cyclical risk. The semiconductor industry has always experienced boom-and-bust patterns. Strong demand can quickly give way to oversupply if customers slow purchases.
If hyperscalers decide to moderate spending after building out data centers, Nvidia could face slower order growth. Even if long-term AI demand remains strong, shorter-term digestion phases can pressure share prices.
Revenue Growth Expected to Slow
Nvidia’s fundamentals remain impressive. However, growth is expected to decelerate from extraordinary levels.
Sales are projected to expand 58% in the current calendar year. By 2027, revenue growth is expected to slow to around 28%. Those are still robust figures, but they represent a step down from the explosive expansion of recent years.
Because valuation is based on future expectations, even a moderation in growth can impact multiples. Nvidia stock currently trades at about 24 times forward earnings estimates. That is roughly in line with the Nasdaq 100 and only slightly above the broader S&P 500.
Historically, Nvidia stock has commanded a much richer multiple. Its five-year average price-to-earnings ratio is around 38 times. While today’s valuation is lower than that average, investors are not necessarily treating it as a bargain.
The reason is simple: markets are forward-looking. If revenue growth continues to slow and capital spending peaks, earnings expansion could normalize further.
Infrastructure Providers Face Pressure
Strategists at UBS, led by Ulrike Hoffmann-Burchardi, recently suggested that valuations for AI infrastructure providers could decline if capex growth slows.
If Big Tech companies reduce the pace of spending, investors may rotate toward firms directly monetizing AI applications rather than those supplying hardware.
That creates a nuanced Nvidia stock outlook. On one hand, Nvidia remains the dominant supplier of high-performance AI chips. On the other hand, its revenue is closely tied to customer investment cycles.
Any signal that hyperscaler budgets are stabilizing rather than expanding could weigh on the stock, even if absolute spending levels remain high.
Earnings as the Next Catalyst
The next major event for Nvidia investors is its upcoming earnings report, scheduled for Feb. 25 after markets close. The market will focus heavily on forward guidance, especially commentary about demand trends and order visibility.
Analysts have not significantly revised 2026 revenue and earnings estimates since tech giants unveiled their latest AI spending plans. Many appear to be waiting for direct updates from Nvidia before adjusting their models.
Shelby McFaddin of Motley Fool Asset Management summed up the current mood: after such a large rally, investors want confirmation. They are reluctant to push Nvidia stock higher without fresh evidence that growth will remain exceptional.
In short, valuation discipline has returned. Nvidia stock is no longer being rewarded simply for strong headlines about AI demand.
Psychology and Consolidation
Market psychology also plays a role in the Nvidia stock outlook. Jim Thorne, chief market strategist at Wellington-Altus, described the stock’s past surge as partly driven by belief in the AI story. When enthusiasm peaks, prices can rise quickly.
But after dramatic gains, consolidation is common. Investors reassess risk, lock in profits, and wait for the next data point.
Nvidia’s current trading range may reflect this pause rather than a fundamental breakdown. The company remains a central player in AI infrastructure, with unmatched scale in data center GPUs.
However, expectations are already high. When a stock has delivered years of extraordinary returns, it becomes harder to surprise the market on the upside.
Is Nvidia Still a Long-Term Winner?
Despite near-term stagnation, Nvidia’s long-term position appears strong. AI adoption is still in early stages across many industries. Enterprises are experimenting with generative AI, automation, and advanced analytics.
As long as demand for advanced computing continues to grow, Nvidia should remain a core supplier. Its ecosystem, software tools, and hardware leadership provide competitive advantages that are not easily replicated.
Still, the Nvidia stock outlook depends on balancing growth expectations with valuation realities. Investors will watch for signs that revenue can keep pace with massive AI investments — and that hyperscalers will maintain strong purchasing momentum.
For now, Nvidia stock appears to be in a holding pattern. The next earnings report could determine whether the stock resumes its upward trajectory or continues to consolidate as the AI buildout matures.
Featured Image – Megapixl
