Nvidia: A Temporary Setback or the Usual Upside-Down?

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Nvidia: A Temporary Setback or the Usual Upside-Down?

They say what goes up must come down. A comforting thought for those of us who spend our days watching numbers dance on illuminated rectangles, and a downright terrifying one for anyone holding a significant number of shares in Nvidia. Currently, Nvidia (NVDA 0.44%) occupies a space in the market cap rankings that’s…well, let’s just say it’s attracting the attention of the sort of entities that measure things in geological timescales.1 It’s a bit like watching a particularly ambitious tower of playing cards being built. Impressive, certainly. But also…inevitably, going to end with a satisfying crash. The question isn’t if it will fall, but when and, crucially, how much fun we can have watching the chaos unfold – and, naturally, positioning ourselves to profit from it.

Previous Wobbles in the Matrix

Defining a “crash” is a surprisingly tricky business. Is it a 20% dip? A 30% plummet? It’s rather like defining “panic” at a goblin market – you know it when you see it, but good luck getting a precise measurement. Nvidia, despite its current lofty position, is no stranger to these temporary reversals of fortune. Over the last decade, it’s experienced several, each greeted with the usual chorus of doom-sayers and opportunistic bargain-hunters.

Take 2019, for instance. A perfectly respectable 30% drop, triggered by the sort of disappointing revenue guidance that sends shivers down the spines of accountants. Apparently, even the most magical of graphics processing units can’t sell themselves if nobody wants to buy them. A lesson for all aspiring alchemists, really.2 Then, in early 2020, the world decided to collectively hold its breath over a rather unpleasant virus. Nvidia, along with pretty much everything else, took a tumble, a rather steeper one than the S&P 500, falling nearly 38%. A reminder that even the most advanced technology is powerless against a microscopic inconvenience.

More recently, in mid-2024, a 27% dip was prompted by…well, frankly, a bit of bureaucratic fussing over chip exports to China. Governments, you see, have a peculiar habit of interfering with perfectly good business arrangements. It’s a phenomenon known as “politics,” and it’s best avoided whenever possible. And last year, a 37% drop, fuelled by anxieties over tariffs. Tariffs, of course, are just a fancy way of saying “making things more expensive.” A concept that baffles economists and delights tax collectors in equal measure.

The Good News, The Bad News, and The Slightly Dubious News

So, Nvidia has crashed – or at least, wobbled significantly – in four of the last seven years. Add in the gradual decline during the bear market of 2022, and you’ve got a fairly consistent pattern of temporary setbacks. The bad news? History suggests it will happen again. The universe, you see, has a fondness for balance. What goes up, must come down. And what goes down…well, usually goes up again, but not before causing a bit of a mess.

But here’s the slightly dubious news: the factors that caused those previous dips don’t seem to be present right now. The data center market is still booming. There’s a glimmer of hope regarding AI chip exports to China. Nvidia has somehow managed to navigate the treacherous waters of trade policies. And, thankfully, the world hasn’t quite descended into another pandemic.3

Even better, even if Nvidia does crash, history suggests it will be temporary. Remember 2019? The stock finished the year up 76%. In 2020, it soared 291% despite the pandemic-induced panic. 2024 saw a 171% jump, and last year delivered a respectable 39% gain. It’s a bit like a particularly resilient rubber duck – you can push it under the water, but it always pops back up again.

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The Future is…Unpredictable, Naturally

Predicting the future is a fool’s errand. Especially when it comes to the stock market. But we can look at the current landscape and make a few educated guesses. The demand for AI shows no signs of slowing down. Nvidia’s Blackwell sales are rising. The new Rubin GPUs are on track to launch. And the adoption of agentic AI is gaining momentum. It’s all rather exciting, really.4

Furthermore, Nvidia’s valuation isn’t quite as terrifying as it once was. The forward price-to-earnings ratio is a relatively modest 24.3. It’s not cheap, but it’s not exorbitant either.

Based on all this, I predict that 2026 will be a good year for Nvidia. And if the stock does crash, it will likely present a fantastic buying opportunity. Because in the grand scheme of things, a temporary setback is just a chance to accumulate more shares at a lower price. And that, my friends, is the essence of contrarian investing. It’s not about predicting the future, it’s about profiting from the inevitable ups and downs of the market. It’s about being a rubber duck in a world of crashing waves.

1 The Guild of Alchemists and Venture Capitalists, you see, measures everything in geological timescales. They’re a patient bunch.
2 The first rule of alchemy: always diversify your portfolio. And never trust a gnome with a bubbling cauldron.
3 Though, frankly, one can never be too careful. Keep a supply of garlic and silver handy, just in case.
4 Though, one does worry about the potential for rogue AI. It’s always the rogue ones you have to watch out for.

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2026-01-20 13:43