Why NVIDIA’s Normalizing Growth Shouldn’t Scare You

NVIDIA’s explosive growth continues, but Wall Street is skeptical. Here’s why long-term investors should take a different view.

KEY TAKEAWAYS

• NVIDIA’s Q4 revenue and earnings growth hit 78% and 72%, far outpacing the broader market.
• The AI boom is not like crypto or blockchain—it’s a fundamental shift that requires massive infrastructure.
• Wall Street punishes companies for slowing growth, even when it’s inevitable after a period of hypergrowth.
• Apple went through the same cycle post-iPhone launch—investors who stayed made 1,872% total return since 2011.
• Revolutions create excitement, but evolution wins the long game. NVIDIA and AI are still evolving.

MY HOT TAKES

• The market always overreacts to slowing growth, forgetting that every major company normalizes after a breakout period.
• NVIDIA isn’t just selling chips—it’s fueling an entire technological shift, just like Apple did with smartphones.
• AI is not another crypto—it’s fundamentally changing how software, automation, and business work.
• Investors who panic now risk missing out on decades of potential gains.
• The smartest play? Focus on the long term. Revolutions end, but evolution—and innovation—never stop.

If only. I am going to give you a break from policy-not-politics today, even though it was just that yesterday that threw water all over an earlier in the day rally in stocks. Longer maturity bond yields remain lower than they have been since last year, which should be welcomed by some sectors and the President. Ok, ok, I have to stop myself. Maybe we’ll cover that in tomorrow’s note. Today, I want to talk about two numbers: 78 and 72. They are actually 78 percent and 72 percent.

Let’s start with the basics. Would you say that those numbers are markedly larger than 5% and 13%? How about 5.5% and 13.5%? And 12.8% and 30.5%? Of course, the answer is yes, yes, and yes. Well, those numbers are the Q4 (reported to date) sales growth and earnings growth of all stocks, stocks in the S&P 500, and the Magnificent 7. The numbers I started with are the sales and earnings growth numbers of NVIDIA, which reported last night. Now, mind you, that those numbers INCLUDE the spectacular growth numbers posted by NVIDIA. It is clear that NVIDIA’s growth eclipsed even the growthiest gang around (Mag 7), which, without NVIDIA, still impressed, but on nowhere near the scale of NVIDIA.

Folks, for a company of that size to grow its sales and earnings at those spectacular rates is almost unheard of. Demand continues to be strong, and guidance also beat estimates. I might add that the company beat EPS and Revenue targets by 5.49% and 2.84% respectively. That may not seem like much, but as you might guess, the bar is high for the AI juggernaut. Its chipsets are clearly at the core of the ongoing AI revolution. That’s right, it is a revolution which rose up from the ashes of the up-and-down, pandemic bust-boom-bust, inflation exploding markets of 2020 through 2022. It snuck up on us revealing itself in early 2023.

It challenged everything the markets knew about technology, which, itself was at one time a revolution… back in the 1980s and 1990s. The markets’ first inclination was to compare it to the still-questionable crypto boomlet and the great promises of blockchain, still not realized. Soon it became clear that AI was not just another blockchain technology, which is simply a novel way of storing and sharing data. The market then began to compare it to the claims made by the Dot Com revolution in the late 1990s. We know how that bubble ended. We also know how, despite the ups, downs, and bad press, that revolution became a game changer. No. Artificial Intelligence could change the way all software and services run. It could enhance productivity by orders of magnitude. This could be far bigger than the emergence of e-commerce. In fact, it can even make e-commerce easier and more profitable!

It didn’t take long for the investment world to jump in and for the tech industry to jump on it. It soon became clear that in order for the revolution to remain viable, vast computing resources needed to be created. Powerful servers, advanced software, power itself, cyber security, data centers—all of that had to be brought to bear in order for Artificial Intelligence to become more… er, intelligent. But wait, at the core of all those vast resources are semiconductors. And there was one company that was, and still is, head and shoulders ahead of the competition. That would be NVIDIA, which witnessed a nosebleed climb in EPS growth as demand for its chips went into overdrive, topping out at 1,089% YoY growth late last year. Of course, earnings can’t grow at that pace forever.

You have to understand something about Wall Street. It is happy to accept breakneck growth without question, but it will be quick to punish you if you lower estimates, even for a good reason. In other words, high water marks are taken as a given. Following its banner growth quarter,  the company logged growths of 617%, 585%, 165%, and 107% in the quarters that followed. One doesn’t need to be a genius to recognize that growth is normalizing. However, for some strange reason, many seek to assail the company for that. Throughout those quarters, it is important to note that the company continued to innovate, releasing more advanced chips, and forging into new markets.

Now, I fully understand that the market for chips can only be so big, and at some point, there may be full penetration. I also understand that at some point, NVIDIA may have competitors, but if AI continues to pervade, demand will continue, and new, more powerful chipsets will be released. What would have happened to Intel if it stopped with its 8086 chip (powered the first IBM PC) that it launched in 1979? What about AMD? It may never have even existed. Maybe Intel and AMD are bad examples as they both (Intel, more so) missed the AI revolution giving NVIDIA the chance to overtake them, but the example is clear.

Perhaps a better example might be Apple. It revolutionized how most of the world communicates and operates by launching the first (almost first) smartphone in June of 2007. It was an instant hit! The stock gained around 65% after the launch. Unfortunately, 2008’s Global Financial Crisis caused markets to collapse, bringing Apple with it. However, that did not stop the company from selling iPhones. Revenue growth vaulted higher topping off at around 74% in 2008. It slowed a bit in the following year, but the release of its iPhone 4 sent sales growth back up to almost 80%. Since then, there were many ups and downs, mostly tied to its release schedules. One can draw a line and note that revenue growth has normalized, and the company has never achieved 2010/2011-like growth since.

I suppose, now looking back, it might have made sense to get out of Apple’s stock, because who wants to own a company that could not maintain revenue growth of 74%. You know this is a setup, right? If you did get out of Apple at the end of 2011, you would have given up the chance to have earned 1,872% total return since. What? That’s not enough for you? The S&P 500 —only gained 374% since then.

How did Apple gain so much for so many years after the smartphone revolution in 2007? Innovation and a growing market. Apple released 22 model groups since its first launch in June of 2007. All that after the revolution. You see, folks, after the revolution, there was evolution, and Apple was able to maintain its position at the table through innovation and fantastic management. By the way, Apple has competition too. It still maintains about 23% of the market, but Samsung and Xiaomi are close behind with ~19% and ~14% market shares, respectively. So, are you still nervous about the numbers 78 and 72? Then, remember this number 1,872. Oh, and also remember to stay focused on the long term… it always wins. 1,872.

YESTERDAY’S MARKETS

Stocks had a mixed, but mostly higher, close yesterday giving up earlier gains after Trump hinted at 25% tariffs on cars “and everything” imported from the EU. Bond yields continue to slip as economic anxiety overtakes fear of inflation. 50 basis points of rate cuts are back on the table by year end, according to Fed Funds Futures.

NEXT UP

• Quarterly Annualized GDP (Q4) came in as expected and unchanged from earlier estimates at 2.3%.
• Durable Goods Orders (January) grew above estimates at 3.1% after slipping by a revised -1.8% in the prior period.
• Initial Jobless Claims (February 22^nd) jumped to 242k, greater than expected and higher than last week’s upward revised 220k claims. Read yesterday’s blog post. 😉
• Today’s Fed speakers include Barkin, Schmid, Barr, Bowman, Harker, and Hammack.
• Today’s important earnings: Six Flags, Medical Properties Trust, Bath & Body Works, Norwegian Cruise Lines, J M Smucker, Penn Entertainment, Warner Bros Discovery, Liberty Media Group, Dell Technologies, Rocket Lab, HP Inc, Sunrun, Redfin, Rocket Cos, SoundHound, and Monster Beverage.

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