Nvidia struggles in 2025 with a 20% stock drop and nearly $1 trillion market cap loss, largely due to trade tensions and concerns over AI growth rate. However, its data center revenue has soared, making up 88% of total revenue. The firm leads the GPU market significantly, but analysts worry about potential demand shifts and export restrictions affecting its future. Investors may see this dip as a buying opportunity amid the uncertainties.
Nvidia has recently been riding a choppy wave in 2025. The tech giant saw its stock tumble by about 20% this year, translating to a staggering loss of nearly $1 trillion in market capitalization. Notably, it has lagged behind the major stock indices, causing investors and analysts to question the company’s future trajectory.
When we take a closer look at Nvidia, the data center revenue shines like a beacon. Over the past three years, this figure skyrocketed from $26.9 billion in fiscal 2022 to an astonishing $130.5 billion now. Yes, you read that right— a fivefold surge. The driving force behind this remarkable growth is none other than Nvidia’s data center division, which contributed an impressive $115.2 billion or 88% of total revenue in fiscal 2025.
So, why is this division so critical? It’s all about graphic processing units, or GPUs, which are essential for all levels of artificial intelligence (AI) development— from training to deployment. As applications like ChatGPT captured the public’s imagination, Nvidia solidified its position as the leading provider of data center GPUs. Research from The Motley Fool highlights that Nvidia’s data center revenue outstrips that of its closest three competitors— Intel, AMD, and IBM — combined, by a staggering three times.
Yet, the skies aren’t completely clear. Two main concerns are looming over Nvidia’s future. The first flickers from within the AI industry itself. There’s a debate on whether the incredible growth of AI models and data centers will taper off. Some analysts suggest that the arrival of more efficient models, like DeepSeek AI, could reduce the need for the vast computing power currently demanded. On the flip side, others argue these more efficient models might actually drive up demand for GPUs as they lower barriers to AI development.
Whatever side you take, it’s important to note that the core question is really about whether the GPU market’s growth rate will slow down, not if it’s going to shrink altogether. The consensus remains that the overall demand for GPUs is poised to grow for years ahead.
Now, the second worry creeps in from the geopolitical landscape, particularly the ongoing trade tensions between the U.S. and China. With AI’s potential being explored by both governments and militaries, GPUs are increasingly scrutinized as a matter of national security. The current U.S. export restrictions on some Nvidia products, which bar sales directly to Russia and China, as well as limit sales to other countries, like Saudi Arabia and India, complicate things further.
Should these export policies tighten more or provoke retaliatory tariffs, Nvidia’s robust data center business might just feel the pinch. Trade tensions linger over Nvidia even as its fundamental business metrics present a solid outlook.
In light of all this, is Nvidia a buy? Not to overlook the uncertainty, but the fundamentals hint at solid ground. The stock currently boasts a price-to-earnings ratio of 37, barely off its five-year low of 32 from early April. As clouds of trade anxieties and concerns around data center growth loom on the horizon, there’s a chance they could clear up just as swiftly. A shift in U.S. policy or another breakthrough in AI technology could catapult Nvidia back to its former glory.
For long-term investors, this recent dip might just present a golden opportunity to snag a stake in the AI powerhouse that is Nvidia.
Nvidia faces challenges stemming from a decline in stock value and ongoing trade tensions, yet its data center revenue remains a robust engine fueling growth. Analysts debate the future of GPU demand amidst rising AI efficiency, and while uncertainties persist, the overall expectation still points to a growing market. With solid fundamentals and the potential for policy changes, investors might find Nvidia an attractive buy despite the current turbulence.
Original Source: www.fool.com