Nvidia has been an AI giant vying for the title of the world’s most valuable company for several years now. Given Nvidia’s 156% year-to-date gain and 2,700% gain over the past five years, many may wonder if the upside from here is limited, but artificial intelligence is still It’s in the early stages. Understanding the AI opportunity and Nvidia’s unique position in the industry makes me bullish on the stock.
Jump into the AI boom
Artificial intelligence has been captivating investors for several years now, and the boom is still going strong, which leads to my optimism for NVDA stock. Businesses are investing heavily in artificial intelligence, and the demand is expected to drive a compound annual growth rate of 19.3% between now and 2034.
Artificial intelligence helps companies enhance their products and services. For example, CrowdStrike (CRWD) has invested in Charlotte AI and other AI capabilities to enhance its cybersecurity software. Adobe (ADBE) is also investing in artificial intelligence to help people and businesses create better images and videos.
Nvidia supplies the AI chips that power these tools. Other semiconductor companies also offer AI chips, but Nvidia continues to innovate its chip products to stay ahead of the competition. The company is working on a new Blackwell chip, expected to be released in 2025.
High cost of AI infrastructure
The way I see it, today’s artificial intelligence is similar to the early days of the Internet. Breakthrough technology has significant barriers to entry. Nvidia is winning much of the new business, which contributes to my bullish outlook on NVDA stock.
Big tech companies, members of the Magnificent Seven, are pouring billions of dollars into this technology. Oracle (ORCL) founder Larry Ellison recently said the company is missing its AI infrastructure goals. Oracle will likely turn to Nvidia to fill that gap, which could result in billions of dollars in additional revenue going to Nvidia. Elon Musk’s companies are also joining the fray. Tesla and xAI plan to spend a combined $20 billion on AI projects in 2024 alone.
Undeterred, companies appear determined to make additional investments in 2025 and beyond. AI infrastructure is expensive to set up, maintain, and scale. This dynamic benefits Nvidia tremendously, as it has a near-monopoly position in the industry. According to IDC, organizations are expected to nearly triple their investments in AI by the end of 2028. The study suggests a compound annual growth rate of 30% over this period.
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Nvidia’s many partnerships
Nvidia is at loggerheads with the “true identity” of major technology companies and publicly traded companies. This is another reason to be bullish on the company’s prospects, and Nvidia’s partners have deep pockets. The AI chipmaker has partnered with Meta Platform (META), Alphabet (GOOGL), Amazon (AMZN), and other industry giants.
Many of these same technology companies are reporting record profits. Nvidia’s biggest customers are relatively isolated, allowing it to continue pouring money into artificial intelligence even during economic downturns. The technology’s mainstream appeal is relatively new, and investment is still increasing. The partnership with Nvidia makes it more likely that the company will continue to outpace the overall market, regardless of whether the economy stalls or not.
Even better, key partnerships can grow with age. As Nvidia continues to provide customers with top-tier AI chips, those customers are more likely to stick with Nvidia and make even larger investments. Nvidia has been working with Amazon for more than a decade, and Alphabet recently expanded its partnership with Nvidia.
Nvidia’s valuation is not outrageous
Nvidia’s valuation remains fairly low considering its sales and earnings growth. Although a price-to-earnings ratio of 58 times seems high, especially when compared to other large technology companies, Nvidia has more than doubled its net income year-over-year.
On a forward basis, NVIDIA stock trades at a P/E ratio of 43.5x, making the valuation look more affordable. Additionally, the company reported a 152% year-over-year increase in net income for the second quarter of 2025. High revenue growth paves the way for high net income growth. If Nvidia continues to report triple-digit year-over-year revenue growth for several more quarters, the forward P/E ratio should continue to decline.
Is Nvidia stock a buy?
Nvidia stock currently has a consensus rating of “Strong Buy” among 42 Wall Street analysts. NVDA’s average price target of $152.44 means it has approximately 23% upside potential. The most optimistic price target, $200, reflects a 62% upside from current levels. Wall Street analysts have rated the NVDA stock with 39 buy ratings, 3 hold ratings, and no sell ratings.
Nvidia Stock Conclusion
Nvidia is the undisputed leader in the artificial intelligence boom. We have established a leadership position in meeting demand for AI capabilities. Nvidia has some of the best customers on the planet, and these companies are certain to continue investing in AI even during economic downturns.
Revenue and net income growth remain impressive, and NVDA stock doesn’t appear to be undervalued when looking at forward multiples. The consensus rating is Strong Buy, as many Wall Street analysts feel the same way. Along with them, I remain bullish on NVDA.
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