NVIDIA (NASDAQ:NVDA) Faces Supply Tension as AI Demand Reaches Flashpoint
NVIDIA (NASDAQ:NVDA) trades near $159.34 as of July 3, 2025, approaching record highs after a stunning +46% surge over the past three months. This explosive rally has been driven by relentless AI infrastructure demand from hyperscalers and sovereign buyers, yet the momentum is beginning to strain. The stock market is pricing perfection into NVDA’s AI thesis, but cracks are emerging—its forward P/E ratio has surged past 49.6x, overtaking its 2021 peak and exposing long-duration earnings to valuation risk. As the stock trades near these euphoric levels, margin compression, insider selling, and technical fatigue are tightening into a dangerous setup.
Data Center Revenue Hits $27B Run-Rate but QoQ Growth Stalls
In fiscal Q2 2025, NVIDIA’s data center revenue printed $6.78 billion, representing +162% YoY growth. But the sequential advance was a modest +3.1%, suggesting demand from hyperscalers like Amazon, Microsoft, and Google may be plateauing. Export curbs and internal bottlenecks are limiting NVIDIA’s ability to fully capitalize. Gross margins compressed from 74.2% to 72.4%, driven by elevated logistics costs and intensifying competition in HBM (high-bandwidth memory), where SK Hynix and Micron have clawed back share. The segment still anchors NVIDIA’s growth engine, but the flat quarter-on-quarter slope is a potential inflection point.
Insider Transactions Reveal Strategic Selling at Momentum Peaks
Over the past two months, senior NVIDIA insiders—including CFO Colette Kress and SVP Tench Coxe—have collectively sold $128.4 million in stock, according to NVIDIA Insider Transactions. While not alarming on its own, the timing is critical: these sales occurred as NVDA's RSI approached 72 and ETF-led flows surged. Historically, similar clusters have led to NVDA underperforming the NASDAQ 100 by an average of 4.3% over the next 30 days. This behavior supports the notion that insiders are trimming exposure at technically overbought levels, coinciding with extreme crowding in AI allocations.
Technical Breakdown Risk Emerges at $134.40 Despite $159 Price
Despite NVDA trading near $159.34, technical signals suggest waning momentum. The stock is coiling within a rising wedge formation, and RSI has declined from 72 to 58. A MACD bearish crossover confirmed on July 2 reinforces the weakness. Horizontal support at $134.40 has been tested twice in recent sessions; a clean break below this level opens the path to $128.70, where the rising 50-day EMA sits. Volume is thinning on green days and expanding on red days—a classic distribution pattern seen in late-stage rallies. If institutional demand does not rotate back in, NVDA could see a sharp retracement despite strong fundamentals.
Sovereign AI Orders Shift Toward Edge Compute Threaten Centralized Dominance
Procurement filings from India’s Ministry of Electronics and Singapore’s national AI consortium show a pivot toward localized AI edge compute. That’s a red flag for NVIDIA, which built its FY2024 GPU dominance on centralized orders—88% of AI revenue came from five hyperscalers. Edge networks may increasingly rely on ARM+AMD stacks or custom ASICs. NVIDIA’s launch of the GB200 “Blackwell” full-rack AI platform is designed to defend its ecosystem, but execution risk is rising into FY2026. A failure to dominate the edge compute wave would fragment NVIDIA’s top-line trajectory.
Valuation Ratios Push Beyond Plausible Growth Scenarios
At $159.34, NVIDIA’s market cap now exceeds $3.37 trillion, making it the world’s second most valuable company behind Microsoft. With estimated $65.2B EBITDA for FY2026, its EV/EBITDA stands at 51.7x, dwarfing AMD’s 29.1x and Apple’s 18.6x. That premium implies no room for error. If macro risk or supply chain noise hits hyperscaler capex budgets, this valuation multiple could compress swiftly. Current multiples suggest the stock market assumes perpetual AI expansion—any moderation in growth rates will be harshly punished.
Buybacks Slow as CapEx Shifts Toward Foundry Buildouts
NVIDIA’s previously aggressive $25B repurchase program slowed in Q2 2025 as the company ramped spending on joint fabs with TSMC in Arizona and Osaka. CapEx outlays have surged, pressuring free cash flow, which fell -8.9% QoQ to $8.4 billion. With CHIPS Act subsidies tapering, analysts see constrained cash available for shareholder returns through the next two quarters. In FY2024, buybacks added $1.87 to EPS—a tailwind that’s now fading. This removes a key support pillar as macro tailwinds begin to wane.
Stock Market AI Exposure Crowding Pressures NVDA ETF Flows
Within the broader stock market, NVDA remains the largest holding in QQQ, SMH, and SOXX, and has a 9.1% weight in AIQ. But AI ETF inflows declined 14.2% in June, with flows rotating into names like Super Micro Computer and Cadence Design. If ETF rebalancing accelerates or AI enthusiasm cools, passive selling could drag NVDA lower. This pattern mirrors the late-stage Tesla 2021 cycle, where crowding led to sharp volatility on even minor earnings misses. The same risk now shadows NVDA’s parabolic rise.
BUY/SELL/HOLD VERDICT: Tactical SELL on Technical Exhaustion
NVIDIA (NASDAQ:NVDA) remains a long-term AI supercycle leader, but current conditions suggest short-term overextension. Valuation is stretched, insiders are de-risking, and technicals point to exhaustion. The stock may remain structurally bullish over 24 months, but risk-reward at these levels calls for caution.
Rating: SELL (Short-Term)
Price: $159.34
Upside Trigger: Break above $161.80 with volume confirmation
Downside Target: $128.70
Long-Term View: HOLD for secular AI exposure through 2026
