Can Nvidia Maintain Market Dominance Beyond 2025?

The Growth Story That’s Started to Show Cracks

Nvidia (NASDAQ: NVDA) has been nothing short of a powerhouse in 2025, with shares climbing 32% compared to the S&P 500’s modest 15% gain. The world’s largest company by market capitalization at $4.3 trillion has ridden the generative AI boom with impressive momentum. Yet beneath the surface, some structural challenges are beginning to emerge that could reshape the competitive landscape in 2026.

The company’s Q3 results underscore its dominance—revenue jumped 62% year-over-year to $57 billion, fueled by demand for advanced data center chips like the Blackwell series. CEO Jensen Huang has signaled that compute demand continues to accelerate, with new GPU architectures like Rubin coming in late 2026 for AI video generation.

Where the Profit Problem Lives

Here’s the paradox: while Nvidia’s business model has proven exceptional for shareholders, it’s becoming increasingly unsustainable for its customers. The chipmaker commands gross margins of 73.4%—figures typically seen in pure software companies, not hardware manufacturers. This level of profitability reflects Nvidia’s pricing power, but it’s also creating mounting pressure on the other side of the transaction.

Major AI companies are hemorrhaging cash at an alarming rate. OpenAI, for instance, reportedly lost over $11.5 billion last quarter, with some analysts projecting combined industry losses could spiral to $140 billion by 2029. When your primary customers are burning through capital at this velocity, their incentive to find cheaper alternatives becomes irresistible.

The Custom Chip Rebellion

This is where Application-Specific Integrated Circuits (ASICs) enter the equation. These specialized custom chips deliver targeted AI performance at a fraction of Nvidia’s premium pricing. Alphabet, Amazon, and OpenAI have all begun investing heavily in proprietary chip design, quietly reducing their dependence on Nvidia’s general-purpose GPUs.

The picks-and-shovels model can still work for Nvidia even when customers struggle—but that doesn’t mean the company is immune to market shifts. Customer losses and defection to custom silicon represent real headwinds for 2026.

Valuation Suggests the Market Has Priced In Caution

Despite Nvidia’s $4.3 trillion valuation, the stock itself remains reasonably valued relative to its growth trajectory. Trading at a forward P/E of 23 versus the Nasdaq 100 average of 26, the valuation implies the market has already baked in expectations of significant deceleration.

A dramatic crash appears unlikely given this forward-looking pricing. However, sideways movement or modest growth could prevail if customer losses continue unabated.

The Verdict

Nvidia isn’t going anywhere—its CUDA ecosystem and decades of GPU engineering expertise have created a durable competitive moat. Yet 2026 will likely be a year of testing that moat as customers prioritize cost reduction and custom solutions. The company’s dominance may persist, but the rates of expansion that drove 32% gains in 2025 could face meaningful pressure.