Is Nvidia's Momentum Over? Here's What History Says.

Nvidia (NASDAQ: NVDA) soared to record highs earlier this year, crossed the $1,000 mark -- and finally launched a stock split in June to lower its per-share price. The reason for the fantastic performance is simple. Nvidia dominates the artificial intelligence (AI) chip market, and this has helped it generate triple-digit gains in earnings in recent times.

Revenue even reached records quarter after quarter -- and in the most recent quarter, it came in higher than a full year of revenue in 2021. This hasn't been just a short-term story: Nvidia stock advanced more than 2,000% over the past five years.

It's clear that this stock has shown plenty of momentum, but the story changed in recent weeks. Though Nvidia shares climbed in the days following its June stock split, from its June 18 high through today, the stock has dropped about 17%. At the same time, rivals are eager to take market share with their top-performing chips, and some experts have warned that the stock market is in a bubble that could be set to burst. Does this mean Nvidia's incredible momentum may be a thing of the past? Here's what history says.

Image source: Getty Images.

From gaming to AI

First, let's take a quick look at Nvidia's path so far. The company originally was known for supplying the gaming industry with high-power graphics processing units (GPUs) to make the sights and sounds of their products come to life for players. But the GPU's ability to perform multiple tasks simultaneously made it suited for many other uses -- particularly AI.

This focus on AI helped Nvidia grow revenue from about $16 billion in a full year in 2021 to $26 billion in just one quarter today. This also helped Nvidia stock start its amazing ascent.

Of course, Nvidia's path hasn't been a straight line upward. Over the past decade there have been ups and downs, and it's important to look at this history to see what happened after all of the down points. In every case, history shows us that Nvidia stock has always moved higher.

NVDA data by YCharts.

This happened even after periods of transition and uncertainty. For example, in the fourth quarter of 2019, Nvidia's gaming revenue suffered, falling in the double digits, due to excess GPU inventory and weak demand from China. Meanwhile, data center revenue roared to records, but this was early in the AI story -- and it wasn't obvious that AI would represent such a valuable area for Nvidia over time.

Nvidia's momentum today

What does this say about Nvidia's momentum today? It's possible that, as in the past, Nvidia stock could be in a period of declines -- this might be short-lived or may continue for some time. But history shows us that Nvidia has always found new momentum, and I would expect this to continue.

Today, investors have gotten used to fantastic earnings growth from Nvidia, and they may not reward every bit of good news by piling into the stock. Investors may also be a little cautious about technology giants at the moment as some economists speak of a bubble ready to burst.

All this offers long-term investors the opportunity to get in on Nvidia -- and potentially other top players too -- at a reasonable valuation. Though Nvidia, trading at about 40 times forward earnings estimates , isn't cheap, it trades at a fair price considering its market leadership and the innovation that could keep it in that position.

Right now, as you decide whether to invest in Nvidia, it's important to take a long-term view of the company and its stock performance potential. Nvidia's long-term story remains strong. The company generates billion-dollar earnings today, with growth in the triple digits, and we're in the early days of the AI story.

Analysts predict that today's $215 billion AI market will soar to $1 trillion by the end of the decade. Even if the market falls a bit short of this expectation, Nvidia still could have a bright future. It's the go-to company for premium GPUs, it's pledged to update these chips on an annual basis, and it's focused on new areas of AI growth such as sovereign AI.

History shows us that even if Nvidia shares wallow in the doldrums for a time, this stock's long-term momentum is far from over -- and that's why it's still a top technology stock to buy and hold .

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy .