Nvidia’s 2025 Struggles and the Road Ahead: Can GTC 2023 Reignite Growth?

Nvidia’s Challenging Start to 2025 and the Promise of GTC

The year 2025 has been far from kind to Nvidia (NASDAQ: NVDA), as its stock has struggled to find traction, leaving it 9% in the red year-to-date. This underperformance is a stark contrast to the company’s recent success, but it’s important to remember that even the most dominant players face headwinds. A combination of macroeconomic uncertainty, the noisy market entry of DeepSeek, and the looming threat of further China export restrictions has kept investor sentiment in check. Additionally, Nvidia is, in a way, a victim of its own success, as Wall Street questions whether the company can sustain its impressive growth trajectory. However, with the upcoming GPU Technology Conference (GTC) scheduled for March 17–21, there’s hope that Nvidia can reignite momentum and address these concerns. Analysts and investors alike will be tuning in to hear CEO Jensen Huang’s plans and updates on the company’s pipeline.

GTC 2023: A Pivotal Moment for Nvidia

While updates on Nvidia’s pipeline will undoubtedly be a key focus at GTC, Bank of America analyst Vivek Arya believes much of the attention will be on several critical areas. One of the most important topics will be the recovery of gross margins, which are expected to bottom out in the current fiscal first quarter (ending in April) and potentially expand to the mid-70s (%) in the second half of the year. Arya views gross margin percentage as a crucial indicator of Nvidia’s pricing power, cost structure, and supply chain execution. During the Hopper product cycle, gross margins peaked at an impressive 79%, driven by factors like expedited product shipments and favorable supply chain conditions. However, with the transition to the Blackwell architecture, Nvidia is facing cost pressures from manufacturing delays, higher input costs, and increased overhead expenses related to installing complex AI systems for customers. These challenges have pulled gross margins down to 71%, and investors will be watching closely to see if the company can stabilize and improve margins as Blackwell ramps up.

Navigating the Transition to Blackwell and Beyond

Arya highlights that the ongoing Blackwell transition is likely the biggest incremental lift Nvidia has had to make, given the complexity of the new architecture. This includes challenges such as rack-scale systems, liquid cooling, mask changes, complex CoWoS-L packaging, and 12-hi HBM (High-Bandwidth Memory). While these changes have been significant, Arya believes that once the transition is complete, future adjustments will likely be more manageable. This bodes well for Nvidia’s ability to stabilize and improve margins moving forward.

The China Impact and Competitive Strength

Another key focus area at GTC will be the “China impact,” including the effect on the H20 chip and potential offsets from demand outside China. Without offsets, this could result in a ~$10 billion (5% sales) and 30-40 cent (10% EPS) headwind. Investors will be eager to hear how Nvidia plans to mitigate these risks and capitalize on demand in other regions. Additionally, the competitive strength of Nvidia’s GPU platform compared to custom chip (ASIC) alternatives will be under the microscope. Despite “heavy ASIC competition,” Arya expects Nvidia to maintain its leading 80-85% market share, thanks to its broad and robust pipeline.

A Compelling Valuation and Wall Street’s Bullish Outlook

With Nvidia’s stock pullback, Arya sees a “compelling valuation” and has rated the shares as a Buy, with a $200 price objective. This target implies an upside potential of 64%, making Nvidia an attractive investment opportunity for those looking to capitalize on the company’s long-term growth potential. Arya isn’t alone in his optimism. Out of 42 recent analyst reviews, 39 rate NVDA as a Buy, with only 3 opting for Hold, giving the stock a Strong Buy consensus rating. The average price target of $177.23 suggests a ~46% upside over the next year, further underscoring the bullish sentiment surrounding the stock.

The Path Forward: AI TAM and Sustainable Growth

Lastly, investors will be hoping Nvidia provides insights into the total addressable market (TAM) for AI and the sustainability of growth beyond 2026. With the AI landscape evolving rapidly, Nvidia is well-positioned to capitalize on this growing market, given its leadership in GPU technology and its strong pipeline of innovations. While the road ahead has its challenges, the upcoming GTC conference offers a pivotal opportunity for Nvidia to address investor concerns, showcase its progress, and outline its vision for the future. For those looking to add exposure to the AI and semiconductor space, Nvidia’s pullback may present a unique buying opportunity. As always, it’s essential to do your own analysis and consider multiple perspectives before making any investment decisions.