Is Nvidia losing its momentum? Dan Niles says the chipmaker will see a slowdown in chip demand that will impact its revenue growth

Demand for Nvidia's chips might see a slowdown, which will put a dent in its revenue growth, according to Dan Niles, founder of Niles Investment Management.

Key factors for slowdown

In a list of key factors that he expects could impact the performance of Nvidia in the near term, he included a cut in capital spending by major players like Microsoft, as per the Insider Monkey report.

Niles mentioned that Microsoft had already cut back on its capital spending for the first half of 2025, at a growth rate of 70% to 80% over the past year and a half. Because Microsoft is one of the biggest spenders on AI, this will certainly take a toll on Nvidia as its chips power much of the AI infrastructure for companies like Microsoft.


According to the Insider Monkey, simply beating earnings estimates is not enough for Nvidia anymore, and the impact of high expectations will continue to weigh on the stock as growth cools.

Nvidia’s forward P/E ratio for the fiscal year ending in January 2026 is around 31, as per the report. An EPS surprise of 8.5% was not able to help the stock.

Similar trend

A similar trend had occurred following the second-quarter earnings after a 5.6% EPS surprise. According to Insider Monkey, it’s difficult to see Nvidia maintaining a mid-70s gross margin by the end of 2026. Over the last two quarters, Nvidia has already reported a drop in its gross margin from 78% to 74.5%.

Nvidia's competition

Even competition for Nvidia is now heating up. Amazon has just unveiled its Trainium 3 chip, which is likely to have a huge leap in performance and efficiency as compared to what Nvidia offers. This chip will be launched at the end of 2025, which is likely to challenge the Nvidia AI monopoly, as per the report.

FAQs

Why does Dan Niles think Nvidia's growth is slowing down?
Dan Niles claimed that Nvidia’s growth may take a hit due to a slowdown in capital spending, particularly from major companies like Microsoft. With Microsoft scaling back its AI investments, Nvidia could see reduced demand for its chips.

How is Microsoft's cut in spending affecting Nvidia?
Microsoft, one of Nvidia's largest customers for AI-related technology, has reduced its capital expenditures. This decrease in spending, especially in the first half of 2025, is expected to have a direct impact on Nvidia’s revenue growth, according to Dan Niles.