Is Nvidia Stock a Buy, Sell, or Hold in 2025?

With shares up less than 3% year to date as of the time of this writing, Nvidia's (NASDAQ: NVDA) rocket ship rally has ended. And there are many reasons why investors are becoming more cautious about the stock.

Generative AI software is still deeply unprofitable. And the emergence of reportedly cheaper open-source rivals from China could undermine top Nvidia customers like OpenAI and Meta Platforms. Let's dig deeper to see if shares in this tech giant are a buy, sell, or hold in 2025 and beyond.

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Fourth-quarter earnings are on the horizon

Nvidia is expected to report its fourth-quarter and full-year earnings after the market closes on Feb. 26. This report will give investors a clearer picture of its growth prospects and the health of the AI industry as it grapples with challenges like high spending and low profitability on the software side (OpenAI lost $5 billion in 2024).

Management seems optimistic, guiding for around $37.5 billion in revenue, representing a 70% year-over-year growth rate compared to the prior-year period. This would be a deceleration in growth compared to last year's revenue surge of 265%, but it is impressive for a $3.4 trillion company.

For comparison, fellow tech giant Amazon posted top-line growth of just 10% in its most recently reported quarter.

Nvidia's dominance relies on its ability to release new and improved graphics processing units (GPUs) for running and training AI models. These products are costly (the company's latest Blackwell chips are expected to cost between $30,000 and $40,000 per unit), but they offer such dramatic performance improvements that they may still provide operational cost and energy savings compared to older chip designs.

How significant is the threat from DeepSeek?

The release of an open-source large language model (LLM) called DeepSeek R1 has shaken Nvidia's growth thesis. The Chinese app reportedly can outperform industry leader ChatGPT on key tasks despite being reputedly developed for just $5.6 million using Nvidia's much less advanced H800 chips, built to comply with U.S. export restrictions to China.

If companies can create cutting-edge LLMs using less-advanced chips, this could undermine the market for Nvidia's most advanced hardware, potentially hurting its growth and margins. That said, there may be some good news for Nvidia and its shareholders.

Image source: Getty Images.

For starters, Nvidia's fiscal fourth-quarter report contains data from the three months ending in January 2025. DeepSeek's R1 was released late in the last month of the period and probably won't materially impact guidance.

Furthermore, experts have disputed some of DeepSeek's claims, with a report from research and analysis company SemiAnalysis estimating that its hardware spending was higher than $500 million instead of the $5.6 million its developers claim. The app also faces increasing regulatory attention over data safety and has already been banned from South Korean app stores due to privacy concerns.

Some of Nvidia's biggest customers, such as Meta Platforms, maintained their commitments to buying AI hardware. Meta doesn't plan to slow its AI spending despite the potential threat from DeepSeek. CEO Mark Zuckerberg expects to invest hundreds of billions of dollars in the industry over the long term.

Is Nvidia a buy, sell, or hold

DeepSeek doesn't look like it will hurt Nvidia's momentum in the fiscal fourth quarter or calendar year 2025. And the release of new Blackwell AI chips will help the company maintain its elevated growth rate. With a forward price-to-earnings ratio (P/E) of 32, the stock remains reasonably priced compared to its fundamentals.

That said, the stock still looks like a hold instead of a buy. While DeepSeek won't immediately pop the generative AI bubble, it is a warning about vulnerability -- especially as top LLM developers like ChatGPT remain unprofitable. Nvidia's low valuation is attractive, but it makes sense, considering the industry's speculative and risky nature.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.