Semiconductor giant Nvidia (NVDA) has established itself as a technology leader with a strong presence in several high-growth markets. The company’s stock has provided investors with significant returns over the years, and the company’s future remains promising thanks to its leadership in artificial intelligence (AI), gaming, and data centers. While there are many promising companies in the semiconductor industry, Nvidia’s high-performance GPUs have propelled the company to the forefront.
Valued at $3.13 trillion, NVIDIA shares have returned 26,069.6% over the past decade. So far this year, the company’s shares have risen 159.5%, outperforming the S&P 500 Index’s ($SPX) 17.8% gain. Following the stock price surge, NVIDIA announced a 1-for-10 stock split on June 7 to make the company’s shares more accessible to employees and investors.
The company is set to report its second-quarter results on August 28, and Wall Street sees further upside potential for this great stock. Let’s see if now is a good time to buy shares before they soar even higher.
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Nvidia’s growth continues
Nvidia GPUs are the foundation for AI workloads and a staple in data centers: the company’s A100 and H100 GPUs are widely recognized as best-in-class for AI processing. Nvidia’s data center division accounted for about 87% of its total revenue in the first quarter, and the division’s revenue grew 427% year over year.
Revenues from the other segments, Gaming and Professional Visualization, increased 18% and 45%, respectively. Total revenues were $26 billion, up 262% year over year, and adjusted earnings per share (EPS) increased 461% during the quarter to $0.61.
Nvidia is also making advancements in the autonomous vehicle (AV) space, offering AI-powered platforms such as NVIDIA DRIVE that are being used by major automakers and startups to develop self-driving cars.
Notably, EV manufacturers such as GAC’s AION Hyper, Nuro, BYD (BYDDY) and XPENG (XPEV) have chosen Nvidia’s Drive Thor platform. Additionally, US-Chinese EV manufacturers Lucid (LCID) and IM Motors are using Nvidia’s Drive Orin platform. The automotive sector, which is still in its infancy, grew 11% in the quarter but has great potential in the long term as adoption of AV technology expands.
“The next industrial revolution has begun. Businesses and countries are partnering with NVIDIA to transform their trillion-dollar traditional data centers into accelerated computing and build a new type of data center — AI factories — to produce a new commodity: artificial intelligence,” said NVIDIA CEO Jensen Huang.
Management believes the company is poised for its next wave of growth as the Blackwell platform, which is expected to drive a new era of AI computing, is expected to ramp up in 2025. Further comment and details on the reported production delays are expected to be provided in an upcoming earnings call. Additionally, management expects Spectrum-X, along with a new software product, NVIDIA NIM, to open up entirely new markets for the company.
Despite its aggressive expansion plans, Nvidia’s asset-light model means it has a strong balance sheet, with a cash balance (cash, cash equivalents, and marketable securities) of $31.4 billion at the end of the first quarter. It also has a low debt-to-equity ratio of 0.17. It also generated positive free cash flow of $14.9 billion in the quarter.
NVIDIA will report its second-quarter fiscal 2025 results on August 28. Management expects revenue to grow 107.2% (plus or minus 2%) to $28 billion. Analysts similarly expect quarterly revenue in the same range and earnings per share of $0.64.
Over the next two years, analysts expect revenue and profits to grow 98.3% and 110.9%, respectively, in fiscal 2025, and 38.5% and 39.3%, respectively, in fiscal 2026.
Nvidia’s future looks promising with many growth opportunities ahead. The continued adoption of AI across industries is expected to increase demand for the company’s GPUs. Additionally, investments in the gaming, autonomous vehicle, and professional visualization markets solidify the company’s long-term outlook.
What is Wall Street saying about Nvidia stock?
Recently, Susquehanna analyst Christopher Rowland reiterated his “buy” rating on NVDA shares, citing the company’s financials and market position, as well as strong demand in the AI market. Rowland has a price target of $160 for the stock.
Additionally, HSBC analysts increased their price target on NVIDIA shares to $145 from $135, giving the company a “buy” rating. The firm believes NVIDIA will beat its revenue expectations for the remaining quarters of fiscal 2025.
On Wall Street, NVDA has an overall “Strong Buy” rating. Of the 39 analysts surveyed, 34 recommend “Strong Buy,” two have a “Moderate Buy,” and three have a “Hold” rating. Based on analysts’ average price target of $141.65, the stock could see an upside of 10.2% from current levels. Wall Street’s highest price forecast of $200 indicates a potential upside of 55.6% over the next 12 months.
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Conclusion for Nvidia Stock
Nvidia shares currently trade at 46 times projected fiscal 2025 earnings, compared with an average price-to-earnings ratio of 69.3 over the past five years.
Nvidia seems to be trading at a premium, but the company’s growth prospects go beyond AI. In March, Jim Cramer, host of CNBC’s Mad Money, said he believes Nvidia will “ignite the next industrial revolution.” As a $3 trillion company with a solid balance sheet and ample resources, I believe Nvidia can find exciting opportunities in any new trends that emerge, boosting its earnings outlook. All things considered, Nvidia remains the top AI stock to buy now.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information please see Barchart’s disclosure policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
