This operating performance figure (not sales or revenue per share) tells the story of whether Nvidia’s parabolic extermination is sustainable.
For over two years, bulls have ruled the roosts on Wall Street. Mature, stock-driven Dow Jones Industrial Arage, Benchmark S&P 500, and innovation-inspired Nasdaq composites all have many record closures and rounded to the best of their rounding.
The upside down catalyst is abundant, including Donald Trump’s return to the White House and corporate revenues exceeding expectations, but pushes Wall Street’s major stock indexes high like the AI revolution There’s nothing to do.
According to analysts at PWC, AI is an addressable market of $15.7 trillion by 2030. AI software and systems have the ability to reason, act and evolve without human intervention.
Image source: Getty Images.
The addressable market for AI is huge, but companies that stand out as more direct winners of this technological evolution than the semiconductor Titan Nvidia do not stand out. (NVDA) 2.77%)). Nvidia’s shares that entered this week had gained a market value of nearly $3 trillion since the end of 2022.
However, after the closing bell on February 26th (years ended January 26th, 2025), Nvidia’s fourth quarter operating results for the 2025 fiscal year are the results of taps, so one very important question You need to answer.
While most investors will see Nvidia’s sales and profit growth as an indicator of the company’s future success, another figure provides a clear answer to this important question.
How Nvidia has become Wall Street’s most important stock
It is important to know where we are now before making predictions about the future. In other words, how has Nvidia grown from a somewhat relevant high-tech company to the most important stock on Wall Street.
Nvidia’s parabolic climbing reflects the dominance of market share in AI-accelerated data centers. Analysts at Semiconductor Analysis Firm TechInsights estimate that NVIDIA accounted for 98% of the graphics processing units (GPUs) shipped to enterprise data centers in 2022 and 2023. , it is likely that Nvidia maintained its monopoly market share last year.
Working in conjunction with Nvidia’s otherworldly demand for hardware is an AI-GPU shortage. If there is a shortage of products in demand, the prices of the above products tend to rise. For Nvidia, the hopper chip was over $40,000 in early 2024, well beyond the $10,000-$15,000 price tag that comes with advanced microdevice. (AMD) 0.93%)) Instinct MI300X AI-Accelerating chip.
Nvidia’s CUDA software platform also plays a key role in its success. CUDA is the developer of the toolkits used to make the most of your GPU. Whether developers maximize their computing potential or build large language models, CUDA helps Nvidia customers stay faithful and loyal to their product and service ecosystem I did.
Finally, Nvidia benefits from a famous order. Most members of “The Magnificent Seven” have placed quite a few orders from the AI darlings on Wall Street. This verifies that data center hardware is the preferred choice.
Image source: Getty Images.
Nvidia parabolic climbing sustainability rests in one operation
Let’s get a better understanding of how Nvidia was hit by a $3.3 trillion valuation and return to the questions in front of us. Can this parabolic execution continue?
If this question is based solely on revenue growth, the answer may be yes. Nvidia recorded annual revenue of $27 billion for fiscal year 2023, and was able to generate $200 billion in revenue three years later. But it’s a much more comprehensive manipulation figure that speaks to what’s coming for Nvidia. And it firmly suggests that the music is slowing down and the party is coming to an end.
When it appears that after the market closed on February 26th, everyone is surfing Nvidia’s fourth quarter operating results with sales and profit figures, my proposal is particularly true of the company’s gross profit margin. It’s about paying close attention.
As mentioned before, AI-GPU Scrucity works in that favor. Nvidia has charged a significant premium for Hopper and Blackwell Chips compared to its competition, raising its generally accepted accounting principles (GAAP) total margin to a peak of 78.4% in the first quarter of 2025 It was helpful for.
NVDA gross profit margin (quarterly) data from YCHARTS.
However, since the first quarter, Nvidia’s GAAP Gross Margin has been contracted. The company’s guidance in November sought 73% GAAP gross profit (+/- 50 basis points) for the fourth quarter at 75.1% and 74.6% in the third quarter.
This (expected) three-quarters of the total margin of GAAP makes it very clear that competition is finally being taken up. Nvidia is not at risk of losing key market share at AI-DATA centres, but ongoing production lamps from AMD and other direct competitors have been fuelled by Nvidia’s incredible pricing power. The rarity of the AI-GPUs keeps chips away (forgives puns).
To add to this point, Nvidia is fighting internal competitive pressures. The same MAG-7 companies selling GPU boat roads internally develop their own AI chips for use in data centers. Even if these internally developed chips do not reach Nvidia hardware in terms of computing speed, they are significantly cheaper and have no backlog. These internally developed GPUs also weigh the Nvidia pricing power.
It is also possible that customers will choose slower (i.e. lower margins) AI chips in future quarters. China’s DeepSeek claims that MAG-7 companies have developed a large-scale language model chatbot at a fraction of the cost, using slower Nvidia chips for what they spend on AI GPUs. It’s there. This does not appear in Nvidia’s fourth quarter operating results, but could strain the company’s 2026 GAAP gross margin outlook.
Nvidia’s gross profit tells the story of whether its parabolic movement will be higher.
