No stock in history has had more influence over the S&P 500 than Nvidia. What could go wrong?
The boom in artificial intelligence since late 2022 has made Nvidia’s market value the largest in the S & P 500. But some on Wall Street are skeptical now that its dominance will continue. Nvidia’s market capitalization — its stock price multiplied by the number of shares outstanding — ended Monday at roughly $4.5 trillion, equal to about 8% of the S & P 500. That’s the “biggest weight in the S & P 500 of any individual stock,” in data going back to 1981 , according to Apollo Global Management’s chief economist, Torsten Slok. This comes on the heels of Nvidia shares seeing massive gains, having soared 239% in 2023, more than 171% in 2024 and 36% in 2025, through Monday’s close. In the past three months alone, as the market fought its way back from April’s brief tariff despair, Nvidia is 56% higher. Nearly nine out of every 10 analysts who cover Jensen Huang’s company on Wall Street rate it a buy, and Nvidia now sells for 59 times its trailing 12-month earnings, according to FactSet data. “There’s a reason the stock is up here, which is Nvidia continues to provide most of the most critical equipment for AI and the demand for AI usage,” said D.A. Davidson analyst Gil Luria, one of the more bearish voices on Nvidia. “So, inferencing continues to rise as the models become ever so potent.” NVDA 3M mountain NVDA, 3-month But there are two areas that could go wrong for Nvidia, according to Luria, who rates Nvidia a neutral and whose $135 price target implies that the stock will slide about 26% over the next year. One red flag is China. “The back and forth between the U.S. government, the Chinese government and Nvidia is a risk to a very big part of Nvidia’s market,” Luria continued. “They only report low-double-digit sales into China. It’s safe to assume that a lot of their other sales are indirectly to China, either to Chinese companies domiciled otherwise, or sales to resellers that ultimately arrive in China. So, it’s a big part of their sales that is at risk from either further action by [the] U.S. or by further restrictions from China.” This past weekend, the Financial Times reported that Nvidia and Advanced Micro Devices both agreed to give the U.S. government 15% share of revenues from chips sold in China in exchange for export licenses. Wells Fargo said Nvidia can grow more than 20% as a result of the agreement, which Luria described as uncertain at the same time as it “probably bodes well for their ability to sell the B30 [chips] either later this year or at some point next year. ” Beyond the lack of clarity surrounding Nvidia’s presence in the Chinese market, another bottleneck also poses a threat to the company’s breakneck growth. “What most of their big customers are now talking about is that the chips aren’t the bottleneck – it’s the ability to have a data center on the power grid with HVAC equipment ready for chips that’s holding them back,” Luria added. That has already started to affect the company, the D.A. Davidson analyst pointed out. “The growth in electricity usage by data centers is so significant that we’re going to start running into power limitations and electricity limitations. So, Nvidia’s ability to grow may start being gated by factors that are out of their control,” he added. Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, told CNBC that, as the market leader, Nvidia may eventually face another challenge as a result of the AI boom: increasing competition. For instance, Amazon Web Services has been making efforts to rival Nvidia when it comes to AI infrastructure , saying earlier this year that it’s looking to reduce training costs associated with AI and provide an alternative to Nvidia’s GPUs. “While they are riding an incredible and massive CapEx spending wave on the GenAI model [and] data center buildout, selling semis is still a very competitive and cyclical business,” Boockvar said. “Nvidia’s around 75% gross [profit] margin is not a long-term sustainable level, especially as their current biggest customers are all looking to be eventual competitors.”
