Could Recession Pull Nvidia Stock Down To $60?

Question: How would you feel if you owned Nvidia stock (NASDAQ: NVDA) and it dropped by 60% or more in the coming months? This may sound extreme, but such a scenario has occurred before – and it could happen again. So far this year, Nvidia stock has already seen a bit of a sell-off, falling from about $148 in mid-January to about $115 currently, a decline of almost 23%. The sell-off has been driven by a couple of factors, including the launch of more resource-efficient AI models like China’s DeepSeek and concerns that potential slowing investments into generative AI could lead to a lower uptake of Nvidia’s GPUs. Moreover, the broader markets are seeing a big selloff, driven by growing concerns of a recession in the U.S. following President Donald Trump’s tariffs on key trading partners.

Here’s the point: during a downturn, NVDA stock could suffer significant losses. Recent evidence from 2022 shows that NVDA stock lost over 60% of its value within just a few quarters. Now, Nvidia stock is already down from levels of $148 to $115 in the matter of about two months. So, could the stock continue its decline and fall to levels of about $60 if a similar scenario were to occur? Of course, individual stocks tend to be more volatile than a diversified portfolio – so if you seek growth with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and delivered returns exceeding 91% since its inception.

Why Is It Relevant Now?

AI Demand slowdown: Over the past two years, companies have heavily invested in AI model training, with Nvidia’s GPUs emerging as the top choice on account of their performance and efficiency. The near-term outlook remains strong, as tech giants like Google and Microsoft are ramping up CapEx for 2025 to expand their AI clouds. However, demand could taper off. AI model training is largely a one-time, compute-intensive process that may eventually slow. Incremental performance gains are expected to diminish as models grow larger, and the availability of high-quality training data could become a bottleneck. As training demand declines, GPU sales could weaken. Consequently, the U.S. economy might face a downturn – possibly even a recession – as discussed in our analysis here on the macro picture, and this could further impact GPU sales. Since AI investments remain unprofitable for most companies, they could be an easy target for cost cuts during a downturn. This could have a pronounced impact on Nvidia.

A shift toward more resource-efficient AI models could also impact Nvidia. China’s DeepSeek model, which was launched in January, gained attention for emphasizing software-driven optimization over hardware dependency, potentially reducing the need for GPUs. The company claims it spent just $5.5 million to train its V3 model, a fraction of the hundreds of millions reportedly spent by firms like OpenAI. With DeepSeek’s model being open source, big tech companies may take inspiration to use similar strategies to cut costs. If widely adopted, this could further dampen demand for AI computing power. See how DeepSeek impact’s Nvidia

The U.S. has imposed export control curbs on most of Nvidia’s latest AI chipset offerings to China, except the H20 chips, due to national security concerns. However, there have been reports that resellers in the gray market are using entities registered outside of China to buy servers that use Nvidia’s latest offerings from companies located in various countries, including Singapore, Malaysia, Taiwan, and Vietnam. This is a valid concern, given that Singapore has become Nvidia’s second-biggest market, accounting for about $23 billion in sales in FY’25, or about 18% of revenue, up from a mere $2.3 billion, or 8% of revenue, back in FY’23. Now, Singapore has announced an investigation into these potential loopholes. This could potentially impact Nvidia’s topline to an extent. See how Trump’s tariffs impact Nvidia stock.

How resilient is NVDA stock during a downturn?

NVDA stock has seen an impact that was slightly worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on NVDA stock? Our dashboard How Low Can NVIDIA Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• NVDA stock fell 62.7% from a high of $30.12 on 3 January 2022 to $11.23 on 16 October 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 17 May 2023
• Since then, the stock has increased to a high of $149.43 on 6 January 2025 and currently trades at around $115

Covid Pandemic (2020)

• NVDA stock fell 37.6% from a high of $7.87 on 19 February 2020 to $4.91 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 11 May 2020

Global Financial Crisis (2008)

• NVDA stock fell 85.1% from a high of $0.99 on 17 October 2007 to $0.15 on 20 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 13 May 2016

Valuation

NVIDIA’s Revenues have surged, growing at an average rate of 80.1% over the last three years, considerably ahead of the  6.3% rise in S&P 500 revenues. However, Nvidia’s valuation remains reasonable despite the strong growth, with the stock trading at about 26x consensus FY’26 earnings. However, some risks loom. Net margins have topped an extraordinary 50% in recent quarters, driven by strong pricing power and high demand for AI chips. However, these margins could be vulnerable if demand weakens or competition intensifies. A slowdown could lead to lower pricing, lower volumes, and a sharp erosion of profitability.

Given the chances of a slowdown in growth and broader economic uncertainties, ask yourself this question: Do you intend to hold your NVDA stock now, or will you panic and sell if it begins to drop to $70, $60, or even lower levels? Holding onto a declining stock is never easy. Trefis collaborates with Empirical Asset Management—a Boston area wealth manager—whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has integrated the Trefis HQ Portfolio in this asset allocation framework to provide clients with better returns and reduced risk compared to the benchmark index; offering a less volatile experience, as reflected in the HQ Portfolio performance metrics.

[1] Returns as of 3/13/2025
[2] Cumulative total returns since the end of 2016