It was a great year Nvidia (NASDAQ: NVDA) shareholders. The price has increased by over 160% in the last 12 months and by as much as 2,100% in five years.

However, it has started to decline a bit over the past month. It is currently down 16% from its all-time high as artificial intelligence (AI) mania may chilly slightly.

At its peak, Nvidia’s market capitalization reached $3.6 trillion. Since then, it has dropped by more than $400 billion.

To put things in perspective that I can imagine, this decline alone is about the same as the market cap AstraZeneca, Shell AND Unilever summed up, three of FTSE100the four largest companies!

Boom or bust?

So what’s next in 2025? Is this just a pause before Nvidia’s stock price starts to rise? Or will this be the first shaky stumble before the stock market crashes?

I see reason to believe that both could happen. Or something in between.

Nvidia’s meteoric rise is fueled by every CEO who can spell “artificial intelligence” investing millions, even billions, in it. There is one problem – not everyone seems to know how to turn it into profit and when they can start earning from it.

A huge investment in artificial intelligence

American venture capital firm Sequoia estimates that the artificial intelligence industry spent $50 billion on Nvidia chips last year. And that’s just the chips, not to mention the rest of the infrastructure.

And that, he says, only generated about $3 billion in revenue. Very few companies have yet significantly expanded the ability to pay AI customers. And few have any idea how they will actually do it.

But Nvidia knows exactly where the money is coming from and is already making it. Even if many of the chip buying companies go bankrupt, Nvidia will still get the money.

The risk lies ahead

Even then, there are factors that could make Nvidia’s current earnings growth rate unsustainable.

Perhaps the main one is competition. Nvidia may now have a near monopoly. But Advanced micro devices (better known as AMD) i Intel are also working, and AMD already claims it can compete with current Nvidia chips.

Given these risks, US business analyst Trefis believes that Nvidia could face a potential drop to $40, which would mean a decline of 70% from today. However, looking at the positive side, it is also said that the stock price could go up to $300.

Nobody knows

I think it’s secure to say that the outlook for the next few years may be volatile.

However, what matters is the long-term valuation. Nvidia currently has a projected price-to-earnings (P/E) ratio of 46. Forecasts predict that this will drop to around 30 by 2026.

I don’t think this is too much of a stretch and it could lead to a well long-term future.

However, no one knows what may happen in the next 12 months. And this huge uncertainty is enough to keep me away.