Is Nvidia Stock Still a Buy Amid Increased Competition & China Headwinds

Nvidia (NVDA) stock has recently declined 4% from its peak, driven by a Chinese antitrust probe into its Mellanox acquisition and intensifying competition, notably from Broadcom securing a $10 billion custom AI chip order from OpenAI, which is also challenging Nvidia's CUDA dominance with open-weight models. Despite these regulatory and competitive headwinds, including volatile China revenue, analysts have significantly raised Nvidia's earnings estimates, projecting strong double-digit growth for FY26 and FY27, with FY27 EPS up 38% and an average price target suggesting 19% upside, leading to a Zacks Rank #2 (Buy) recommendation.

Analysis

Nvidia's stock has experienced a 4% pullback from its 52-week high, driven by a convergence of significant competitive and regulatory pressures. A primary factor is an antitrust probe in China by the State Administration for Market Regulation (SAMR) concerning the 2020 Mellanox acquisition. This probe exacerbates existing geopolitical headwinds, with Nvidia's China revenue having already declined from $21 billion to $17 billion in the last fiscal year and a current forecast of zero revenue from the region, implying a potential loss of $2-$5 billion in sales. Concurrently, the competitive landscape is intensifying. Broadcom is emerging as a credible challenger, underscored by a $10 billion custom XPU chip order from OpenAI, which is also actively working to reduce dependency on Nvidia's proprietary CUDA platform by releasing open-weight models. Despite these substantial near-term risks, Nvidia's forward-looking financial metrics remain exceptionally strong. Analysts have revised earnings estimates upward, projecting 48% earnings growth in FY26 and a further 39% in FY27, with FY27 EPS estimates up 38% from a year ago. On a relative basis, Nvidia's valuation at a 40x forward earnings multiple appears more reasonable than Broadcom's at 53x, and the average analyst price target suggests a 19% upside from current levels.

Key Decisions for Investors

• Consider the recent 4% stock decline as a potential entry point for long-term positions, as strong forward earnings estimates (48% growth in FY26, 39% in FY27) present a bullish counter-narrative to current headwinds.
• Closely monitor developments from China's antitrust probe and the material impact of export controls, particularly the company's forecast of zero China revenue in the current quarter, which represents a $2-$5 billion risk.
• Evaluate the strategic threat posed by the Broadcom-OpenAI chip partnership and the industry's move toward open-weight models, which could challenge Nvidia's proprietary CUDA ecosystem over time.
• Weigh the stock's more reasonable 40x forward P/E multiple against competitor Broadcom's 53x, alongside the analyst consensus of 19% upside, as key justifications for a 'buy the dip' strategy.