Has Nvidia Stock Peaked at $153? One Telltale Metric Offers a Decisive Answer.

For the better part of the last two-plus years, the stock market has been unstoppable. The 30-component Dow Jones Industrial Average, broad-based S&P 500, and innovation-fueled Nasdaq Composite have all soared to numerous record-closing highs.

Investors haven't had to dig too deeply for the reasons behind this epic rally in equities. Everything from stock-split euphoria to the declining rate of inflation have helped lift the Dow Jones, S&P 500, and Nasdaq Composite to uncharted territory.

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But among these catalysts, none has been more directly responsible for lighting a fire under Wall Street than the rise of artificial intelligence (AI).

In Sizing the Prize, the analysts at PwC pegged AI as having the potential to add $15.7 trillion to the global economy by the turn of the decade. The capacity for AI-driven software and systems to reason, act, and evolve, all without the need for human intervention, gives this technology utility in most industries around the world.

Image source: Getty Images.

Although dozens of tech stocks have witnessed their shares soar as a result of the AI revolution, no company has been a more direct beneficiary than Nvidia (NASDAQ: NVDA). Leading up to its latest round of operating results, Nvidia had packed on nearly $3 trillion in market cap since 2023 began, including hitting an all-time high of $153 per share on Jan. 7, 2025.

But while Nvidia's headline growth figures continue to look phenomenal, one telltale metric suggests Nvidia's best days are in the rearview mirror.

Nvidia's hardware is what makes AI-accelerated data centers tick

Market-leading businesses don't just add $3 trillion in market cap over the course of two years by accident. Nvidia's ascent is a reflection of its hardware being the clear top choice in high-performance data centers.

Last year, the analysts at semiconductor analysis firm TechInsights estimated that Nvidia accounted for 98% of the graphics processing units (GPUs) shipped to enterprise data centers in 2022 and 2023. Considering that Nvidia recorded $130.5 billion in full-year sales in fiscal 2025 (ended Jan. 26, 2025), and data center revenue made up more than 88% of net sales, it's fair to assume that Nvidia's Hopper (H100) chip and successor Blackwell GPU architecture are in high demand.

Then again, assumptions aren't necessary. According to Nvidia's fiscal fourth-quarter filing, it "delivered $11 billion of Blackwell architecture revenue." This is an incredibly quick ramp-up that demonstrates just how popular the company's hardware is with businesses wanting to be on the cutting-edge of AI innovation.

Nvidia's CUDA software platform has played a key role in assisting growth, as well. CUDA is the toolkit leaned on by developers that helps them maximize the computing potential of their GPUs, along with build large language models. Most importantly, it's keeping Nvidia's customers loyal to the brand.

But perhaps the prevailing reason Nvidia has seen its sales catapult from $27 billion to $130.5 billion in just two years is AI-GPU scarcity. When demand for a good or service overwhelms supply, it's normal for the price of said good or service to climb until demand tapers. Nvidia has been commanding up to $40,000 per Hopper chip and $30,000 to $40,000 for each Blackwell chip. This compares to Advanced Micro Devices selling its Instinct MI300X AI-accelerating chips for $10,000 to $15,000 per unit.

Otherworldly pricing power has lifted Nvidia's sales and profits, as well as boosted its margins.

Image source: Getty Images.

Nvidia's best days may be in the rearview mirror

If investors were to solely judge Nvidia stock based on its ability to leapfrog the consensus revenue and profit estimates of Wall Street analysts, there'd be no end in sight to its upside potential. But if these same investors were to dig beyond the headline figures, a different story would emerge.

During the fiscal fourth quarter, Nvidia precisely met its forecast generally accepted accounting principles (GAAP) gross margin of 73%. Though the company's gross margin has increased substantially from where things stood before the AI revolution took shape, a worrisome gross margin trend has emerged that spells trouble for Nvidia stock.

Here's a snapshot of Nvidia's GAAP gross margin since peaking during the fiscal first quarter of 2025:

• Q1 2025: 78.4%
• Q2 2025: 75.1%
• Q3 2025: 74.6%
• Q4 2025: 73%
• Q1 2026 (est.): 70.6%

NVDA Gross Profit Margin (Quarterly) data by YCharts. The above chart doesn't yet reflect Nvidia's GAAP gross margin of 73% for the fiscal fourth quarter.

This persistent decline in gross margin is indicative of competition picking up in a big way. The includes domestic competitors like AMD, as well as overseas tech giants, such as China-based Huawei. As AMD and Huawei increase their GPU output, the AI-GPU scarcity that's afforded Nvidia phenomenal pricing power will wane.

But it's not just these direct competitors that are the problem. Many of Nvidia's top customers by net sales are internally developing AI chips to use in their data centers. This includes Microsoft, Meta Platforms, Amazon, and Alphabet. The Hopper and Blackwell GPUs maintaining their computing speed superiority likely won't be enough to save Nvidia from losing out on valuable data center space in future quarters to these less-costly and more readily available AI chips.

There are also ongoing concerns regarding China-based DeepSeek and its large language model chatbot. DeepSeek's R1 model is touted as being developed for a fraction of the cost of what Wall Street's most-influential businesses are spending on their AI-data centers, and it utilizes less-powerful Nvidia chips. There's the worry that select businesses may shift their orders to less-costly (i.e., lower margin) hardware.

The final dagger is that most businesses lack a well-defined game plan for how to optimize their AI solutions and/or generate a positive return on their AI investments. Investors overestimating the early stage adoption and utility of a next-big-thing technology is nothing new. Rather, it's the recipe that often leads to tech bubbles forming and bursting.

Based on Nvidia's GAAP gross margin trend over the last year, it looks increasingly likely that its stock has peaked at $153 per share.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. 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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Sean Williams has positions in Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.