The Paradox of Greatness
In a Perfect Business, There’s No Margin for Imperfection
“Great businesses aren’t always great investments, and great investments aren’t always great businesses”
Nvidia is a Great Business
I want to start with saying NVIDIA is arguably one of the best companies on the globe.
With 60%+ revenue growth, ~70% gross margins and 50%+ net margins, Nvidia is a beast business that has taken the world by storm in this AI driven era of the economy.
Nvidia has had a CRAZY run in the market these past few years, driven by their dominance in AI hardware.
Total returns have exceeded +1,120% over the last 5 years! The company also became the world's first $4 trillion company this past summer, with revenue growing from $27B in FY2023 to over $130B in FY2025.
Unfortunately I missed out on this one!
Regardless, we sit here today on February 15, 2026, and I think there are better opportunities in the market.
In this article today I’m going to tell you why… let’s jump in!
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Pricing Power will get Tested
AMD is coming to the market later this year with its MI400 series, which is expected to offer competitive compute performance at materially lower prices (some early price signaling is at a 50% discount).
If AI customers can get comparable compute capabilities for meaningfully less cost, customers will migrate portions of their compute infrastructure over to competitor chips like AMD.
If customers move some of their business away from Nvidia’s closed-system, Nvidia may have to retaliate with lowering their prices, which will materially affect their bottom line, negatively affecting EPS and signaling bearish sentiment in the market, materially driving down the stock price.
Nvidia must maintain their ability to price their chips and compute stack at a premium by continuing to offer the latest and greatest technology on the market.
I don’t think this is sustainable.
Ecosystem Strength Creates Incentives to Escape
AI infrastructure buyers would really like if other semiconductor players like AMD came into the market with competing technology at scale, as this would allow them to escape the ecosystem lock-in that Nvidia is trying to push into the market.
It’s similar to the Apple smartphone story. We all wish we weren’t locked into the Apple ecosystem. But we are. And it’s likely too late for this to change.
Full concentration risk for customers means total pricing and relationship control from the other side (Nvidia’s side), which customers do not want, especially with a revolutionary technology like AI that will change the future of humanity.
Hyperscalers such as Meta, Amazon and Google don’t want to get locked into buying solely from Nvidia. This is also a reason these conglomerates are developing their own chip technology — they don’t want to get stuck into the ecosystem and want customization of their infrastructure.
A Nvidia-dominated battleground in semiconductor development would not allow for this.
As hyperscalers start to develop their own chips (Amazon with Trainium, Google’s TPUs, Meta’s MTIA, Apple currently creating one) and competition starts to rise from competitors like AMD, the incentives to escape from the closed Nvidia ecosystem rises day after day.
Priced to Perfection
This isn’t an argument that Nvidia is wildly overvalued on traditional metrics like earnings or revenue.
It’s an expectations argument.
Earnings releases are now events where anything short of a flawless ‘beat-and-raise’ will disappoint investors. When the bar is set at “another historic quarter,” execution has to be nearly perfect every quarter.
That asymmetry matters for material increases in price per share.
The stock doesn’t just need strong numbers. It needs continued blowouts
Sky-high double-digit revenue growth
Sky-high triple-digit earnings growth
Expanding guidance
No hints of slowing capex from hyperscalers
That’s a tough standard to maintain indefinitely!
Overcrowded Ownership
Lastly, and this is a softer argument, but the ownership profile in the public markets for Nvidia is saturated.
Nvidia has become the default AI trade.
Everybody and their mom wants to be a shareholder of Nvidia.
With the fugazi-fugazy days of AI over, everyone wants exposure to this new technology innovation. And with most people not familiar with public equities, the default option is to invest in Nvidia.
This includes institutional portfolios, passive index funds, retail flows and financial advisors. When everyone already owns the stock as their AI proxy, marginal new buyers becomes harder to find.
I believe that stocks move on incremental demand and if positioning is already heavy, even strong fundamentals don’t guarantee upside acceleration.
I Could be Wrong!
None of this changes the core reality that Nvidia is a phenomenal business.
It may continue to innovate, growth rapidly and compound earnings at an impressive rate, and I may miss out on another massive Nvidia run.
But for me personally, the risks, increased competition and high performance hurdles are too strong for me to take part in betting on continued upside.
I sold my entire Nvidia position last week for $192/share.
If you think differently about Nvidia’s future roadmap and growth and earnings potential, please feel free to leave a comment — I’d love to chat about it.
Enjoy the rest of your weekend!
Disclaimer: The information provided in this publication is for informational and educational purposes only and does not constitute investment, financial, or other professional advice. ThePrivatePublicInvestor and its authors are not registered investment advisors or broker-dealers. All opinions expressed reflect personal views as of the date published and are subject to change without notice. While efforts are made to ensure accuracy, no guarantee of completeness or reliability is given. Past performance is not indicative of future results. The author may hold positions in securities discussed. Use of this content is at your own risk.
The circular financing in this space is also very 'interesting'. Nvidia just recently pulled another one.
When one of them gets into bigger trouble, it could also have big impact on others. I'm watching with the interest...
Great write-up on Nvidia Alex. Being an Nvidia shareholder since 2018, I appreciate the fresh take on the company. I agree that the stock has been priced for perfection for years and that a slowdown would mean a massive drawback in the stock price. It isn't an if, but a when. Like yourself, I'm betting that AMD takes more market share over the mid to long-term; I am currently in the middle of reviewing my AMD deep dive as I type this response. Their chiplets and inference narratives are compelling and I have no doubt Lisa Su, who has seen a 100X+ of the stock price in her tenure, is the one to do it.