Overall, Wall Street analysts believe Nvidia stock is undervalued, despite its impressive recent returns.
Nvidia (NVDA 0.06%) It was the best performing stock in the S&P 500. (SNPINDEX: ^GSPC) The stock has increased 2,890% over the past five years. The company completed two stock splits during the same period. The first was a 4-for-1 stock split in July 2021, and the second was a 1-for-10 stock split in June 2024.
Despite the huge profits, Wall Street remains bullish on semiconductor companies. Of the 65 analysts who follow Nvidia, 92% rate the stock with a “buy” rating, and the remaining 8% give the stock a “hold” rating. Additionally, NVIDIA’s median price target of $150 per share implies an upside of 14% from the current share price of $132.
Here’s what investors need to know about this artificial intelligence stock.
Nvidia is the foundation of the artificial intelligence movement
Nvidia designs the computing industry’s most coveted graphics processing units (GPUs). GPUs perform technical calculations faster and more efficiently than central processing units (CPUs), allowing them to accelerate complex workloads such as artificial intelligence (AI). Nvidia has over 80% market share in data center AI processors, and its leadership is rooted in CUDA.
Nvidia introduced the CUDA programming model in 2006. This turned GPUs (originally designed for computer graphics) into general-purpose chips that can accelerate all kinds of applications. The CUDA ecosystem currently includes hundreds of software libraries that streamline development workflows across a variety of fields, from data analysis and machine learning to scientific simulation and computational chemistry.
No other chipmaker offers comparable developer tools, making Nvidia GPUs the gold standard. “Each year, Nvidia responds to the needs of software developers by pumping out specialized code libraries that enable GPUs to perform vast numbers of tasks at speeds not possible on traditional general-purpose processors like those made by Intel. and AMD,” the Wall Street Journal reported.
More recently, Nvidia has been pushing its software and services even further with AI Foundry and AI Enterprise. The former enables enterprises to customize large-scale language models pre-trained on Nvidia supercomputing infrastructure, while the latter simplifies AI application development across use cases such as content generation, robotics, and predictive analytics. will be done. “NVIDIA Software will end this year with a run rate of $2 billion,” CEO Jensen Huang recently told analysts.
Finally, Nvidia further strengthened its leadership and strengthened its ability to monetize AI by expanding into new data center hardware areas. “We’re literally building an entire data center so we can monitor everything, measure everything, and optimize across everything,” Huang explained. Importantly, Nvidia has secured a leadership position in generative AI networking gear, and demand for its first data center server CPU (Grace) is very strong among supercomputing clients.
The conclusion is: Nvidia is more than just a chipmaker. The company is a full-stack accelerated computing company with products that span hardware, software, and services. Nvidia’s breadth of portfolio and best-in-class performance of its GPUs create a competitive moat that rival chipmakers will find difficult to overcome.
Nvidia stock trades at a reasonable valuation compared to Wall Street expectations
Nvidia reported better-than-expected second-quarter results. Sales increased 122% to $30 billion and non-GAAP earnings increased 152% to $0.68 per diluted share, driven by particularly strong growth in the Data Center segment.
“NVIDIA achieved record revenues as the world’s data centers strive to modernize their entire computing stack with accelerated computing and generative AI,” said Huang. Masu. The chart below shows revenue growth across Nvidia’s four major business segments.
segment
Q2 2024
Q2 2025
change
data center
$10.3 billion
$26.3 billion
154%
Games and AI PC
2.5 billion dollars
$2.9 billion
16%
professional visualization
$379 million
$454 million
20%
Automotive and robotics
$253 million
$346 million
37%
total
$13.5 billion
30 billion dollars
122%
Data source: Nvidia. Note: Q2 2025 ended in July 2024.
In the short term, Nvidia has a big push for the upcoming launch of Blackwell GPUs. The next-generation chip can process AI training and inference tasks 4x and 30x faster, respectively, compared to the previous Hopper architecture. Blackwell’s production ramp-up will begin in the fourth quarter of fiscal 2025 (ending January 2025). CEO Jensen Huang says this is likely to be the most successful product in the history of the computing industry.
Looking further ahead, Grand View Research predicts that AI accelerator sales will grow 29% annually through 2030, with overall spending on AI hardware, software, and services increasing 36% annually during the same period. . Nvidia is one of the companies that stands to benefit most from this. In fact, CFRA’s Angelo Gino said NVIDIA “will be the most important company to our civilization over the next decade as the world becomes AI-driven.”
Wall Street expects Nvidia’s revenue to grow 37% annually over the next three years. This consensus makes the current valuation of 62x P/E seem reasonable. These numbers give Nvidia a PEG ratio of 1.7, at a discount to its three-year average of 3.1. Patient investors can confidently buy a small position in Nvidia today and should plan to add a few more shares if the stock price drops more than 10%.
Trevor Jennewine holds a position at Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: November 2024 $24 short calls on Intel. The Motley Fool has a disclosure policy.
