Large technology companies continue to aggressively increase their planned spending on artificial intelligence infrastructure. However, NVIDIA (NVDA.US), one of the primary beneficiaries of this massive capital outlay, has seen its stock price remain largely stagnant for months. Since the beginning of last year's fourth quarter, the stock has gained less than 1%. Although it reached a record high in late October, its overall trend has primarily been one of range-bound movement. Furthermore, its performance in early 2026 has only slightly outperformed the S&P 500 index. This represents a slowdown in growth momentum compared to NVIDIA's nearly 40% gain in 2025, which followed two consecutive years of triple-digit percentage growth.
Even as companies like Meta Platforms (META.US), Alphabet (GOOGL.US), Microsoft (MSFT.US), and Amazon (AMZN.US) project a significant surge in capital expenditures—expected to exceed $600 billion by 2026—this has failed to provide a substantial boost to NVIDIA's share price. This is largely due to growing investor concerns about the returns on these massive investments. JoAnne Feeney of Advisors Capital Management stated, "There may be increasing worry that the ultimate profits from AI will not keep pace with the announced capital expenditures." She added that pouring more money in now increases the risk of the market reaching saturation sooner, which could accelerate the timeline for companies to pause investment and allow new computing technologies to be fully absorbed.
The cyclical nature of the chip industry is already being factored into NVIDIA's valuation. As revenue growth expectations moderate for the coming years, its valuation has compressed accordingly. Data indicates that NVIDIA's sales are forecast to grow by 58% this fiscal year, slowing to 28% by 2027. NVIDIA's stock currently trades at approximately 24 times expected earnings, roughly in line with the Nasdaq 100 Index and slightly above the S&P 500. Although this price-to-earnings ratio is significantly below the stock's five-year average of 38, investors are not viewing it as a discount buying opportunity.
A team led by UBS strategist Ulrike Hoffmann-Burchardi suggested that as capital expenditure growth slows, valuations for infrastructure providers like NVIDIA could face downward pressure. In a February 10th report, they wrote, "Capital expenditure growth is likely to moderate from current levels, which may improve investor sentiment towards the spenders, but it could be a negative factor for some companies in the supporting layers."
The next potential catalyst for NVIDIA's stock price is its upcoming earnings report, scheduled for release after the U.S. market closes on February 25th. Investors will closely scrutinize NVIDIA's performance guidance and the outlook for demand for its chips, which have constituted a major portion of spending by hyperscale data center operators in recent years. Shelby McFaddin, an investment analyst at Motley Fool Asset Management, commented, "Ultimately, it comes down to valuation and the company's current financial standing. Investors want to wait and see how NVIDIA addresses this before deciding to reward it."
Since several tech giants unveiled their substantial spending plans, Wall Street analysts' forecasts for NVIDIA's 2026 revenue and earnings have seen little change. Analysts may be waiting for an update from NVIDIA before adjusting their financial models. Jim Thorne, Chief Market Strategist at Wellington-Altus, noted that after a significant rally for a stock like NVIDIA, a period of consolidation is natural, but market sentiment can shift rapidly. Thorne said, "It's psychology. Suddenly, everyone believes the story, and the stock price goes wild."
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