Nvidia's Q4 Earnings: Strong Performance Amid AI Boom, but Challenges Loom

Nvidia Wipes $375 Billion Of Investor Wealth In 2025: 'Margin Of Error Razor Thin,' Says Analyst Reiterating 'Buy On Dips' Call - Invesco QQQ Trust, Series 1 (NASDAQ:QQQ), NVIDIA (NASDAQ:NVDA)

Shares of Nvidia Corp. NVDA have fallen 13.13% in 2025, wiping approximately $375 billion in investor wealth despite strong fourth quarter earnings. While some analysts say that this could be because of the company's outlook on "gross margins," others believe that these concerns are "misplaced". What Happened: The chipmaker led by Jensen Huang dropped 8.48% to $120.15 apiece on Thursday following the fourth quarter earnings on Wednesday in after-hours. While the technology giant beat estimates on all fronts, its Blackwell AI chips recorded a staggering $11 billion in first-quarter sales alone -- the fastest in the company's history. However, the market reaction wasn't upbeat because of a "sequential dip in its gross profit margins, heightened competition, persisting customer concentration, and stratospheric expectations," said Subho Moulik, the founder and CEO of fintech platform Appreciate. "Nvidia earnings were excellent and the concern about margins is misplaced," said Nigam Arora and Dr Natasha Arora from The Arora Report in their note. Calling it a "winner's curse," Moulik said that Nvidia's near-flawless track record has set exceptionally "high investor expectations". With rapidly evolving AI sector and looming macroeconomic uncertainties, "the margin for error is razor-thin," he added. In 2025, the stock has underperformed the market and pulled the tech-heavy Nasdaq down with it. "From an investment perspective, it remains a buy on dip, particularly with its next-gen Blackwell chips posting amazing numbers and protect Nvidia's medium-term runway," said Moulik. According to Arora Report, "The real issue facing NVDA as a stock is that it is in the formidable stage," which according to the note is the fifth stage of a long trade. The note explained that a stock witnesses a "crowded trade," when it enters the fifth stage after logging in the highest alpha in the fourth stage of a long trade. See Also: Jensen Huang's Nvidia Fuels 'AI Factory' Boom: Revenue Growth In Data Center Business Dominates Peers With A Staggering 3460% Growth Over 5 Years Why It Matters: The fourth quarter gross margins fell 71%, barely meeting estimates but down from 73.5% last quarter. But analysts believe that the fall in margins was expected because of the Blackwell production ramp up. The adjusted gross margins aren't going to improve soon, with the management expecting it to remain in the low 70s, said Moulik. Additionally, DeepSeek has challenged U.S. AI exceptionalism, potentially reshaping the chip market as its model prompts more players to replicate it, casting doubt on future AI chip volume and value growth, added Moulik. Price Action: Shares of Nvidia were 0.93% higher in premarket on Friday, whereas QQQ advanced 0.36%. Benzinga tracks 41 analysts with an average price target of $176.13 for the stock, reflecting a "buy" rating. Estimates range widely from $120 to $220. Recent ratings from DA Davidson, Cantor Fitzgerald, and Benchmark average $175, suggesting a potential 44.15% upside. Read Next: Dell Technologies Projects $15 Billion AI Server Revenue For FY26, Raises Dividend By 18% Amid A Mixed Quarter Photo courtesy: Shutterstock NVDANVIDIA Corp$121.000.71%OverviewQQQInvesco QQQ Trust, Series 1$501.850.32%Market News and Data brought to you by Benzinga APIs

Nvidia Just Delivered Another Blowout Quarter. Here Are 3 Crucial Things You Shouldn't Miss. | The Motley Fool

Nvidia (NVDA -8.48%) is known for hitting it out of the park when it comes to earnings, surpassing analysts' estimates quarter after quarter and reporting record levels of revenue. This is thanks to the company's dominance in the red-hot growth area of artificial intelligence (AI), a $200 billion market forecast to reach $1 trillion by the end of the decade. Nvidia makes the world's fastest graphics processing units (GPUs) -- the chips powering the most crucial of AI tasks -- and a broad range of related products and services. And the company's strong momentum kept going in the most recent quarter and fiscal year. The tech giant reported a 78% increase in fourth-quarter revenue to a record $39 billion and a 114% increase in full-year revenue to a record $130 billion. Nvidia also predicted revenue for the current quarter would reach $43 billion, representing an 65% increase year over year. This is fantastic news, but the story behind the numbers is even more exciting and offers a clear picture of what's to come. Let's check out three crucial things from Nvidia's latest report that you shouldn't miss. This quarter marked a particularly important moment for Nvidia because the tech giant launched a potentially game-changing product: its new Blackwell architecture. The customizable platform, offering seven different chips and other key features for customers, already has brought in $11 billion in the company's fastest production ramp ever. Nvidia said it beat its own expectations regarding system availability and the ability to offer various configurations to customers. This is key because Blackwell is a complex product to roll out, and Nvidia was able to do it and generate major revenue right out of the gate. Importantly, the company expects a "significant ramp" of Blackwell in the current quarter -- the first quarter of the fiscal 2026 year. It's also worth noting that demand for Blackwell remains incredibly strong. CEO Jensen Huang used the word "extraordinary" to describe it. The platform was designed to power reasoning inference, or the "thinking" over time a model does to solve complex problems. And this type of inferencing could supercharge Nvidia's growth moving forward. The complexity of rolling out a customizable product like Blackwell is weighing on Nvidia's profitability today, and this will continue in the months to come. This is because Nvidia has focused on speeding up manufacturing to meet demand for the platform. So the company's gross margin, which has been in the mid-70% range in recent times, has declined to the low 70s. In the quarter, gross margin came in at 73%, and Nvidia predicts it will narrow to about 70% in the current quarter as the Blackwell ramp continues. It's important to remember that even 70% represents a very high level of profitability. The fact that Nvidia can pull this off during such a major launch is impressive. Nvidia expects this dip to be temporary, as once the ramp is complete, the company sees ways of lowering costs. And it aims to return to a gross margin in the mid-70s later in the fiscal year. So, I wouldn't be worried about this dip in gross margin, but it will be important to see if Nvidia can return to the extremely high-margin levels it established prior to the launch. A few weeks ago, Chinese start-up DeepSeek announced it trained its model for a fraction of the amount tech giants have spent on their AI programs -- and investors worried that those giants would reconsider their investments. If they were to cut spending, that could hurt Nvidia's revenue prospects. But Nvidia says a variety of elements are set to supercharge its growth. First, the company says it has "forecasts and plans" from its major customers. "We have a fairly good line of sight of the amount of capital investment that data centers are building out toward," Nvidia's Huang said. Accelerated computing and reasoning AI will be crucial architecture in data centers, according to Huang, and that's great news because Nvidia's GPUs power these technologies. The company is also powering the next phases of AI growth from agentic AI to apply the technology to companies' real- world problems to the build-out of sovereign AI to help governments develop their own platforms. Nvidia's earnings and share price have soared over the past few years, but these points add to evidence that the company's growth is far from over. As mentioned above, the AI market is in its early stages of existence, so there's a lot more to come, and Nvidia's innovation should help it to benefit through the various phases.

Is the Party Over for Nvidia on Feb. 26? One Figure Provides a Clear Answer.

For more than two years, the bulls have ruled the roost on Wall Street. The mature stock-powered Dow Jones Industrial Average, benchmark S&P 500, and innovation-inspired Nasdaq Composite have all vaulted to numerous record-closing highs. Although upside catalysts have been abundant and include the likes of Donald Trump's return to the White House and better-than-expected corporate earnings, nothing has propelled Wall Street's major stock indexes higher quite like the artificial intelligence (AI) revolution. According to the analysts at PwC, AI is a $15.7 trillion addressable market by 2030. Empowering AI software and systems with the ability to reason, act, and evolve without human intervention gives this technology global reach. While the addressable market for AI is enormous, no company has stood out as a more direct winner of this technological evolution than semiconductor titan Nvidia (NVDA -2.80%). Entering this week, Nvidia stock had gained close to $3 trillion in market value since the end of 2022. But with Nvidia's 2025 fiscal fourth-quarter operating results on tap after the closing bell on Feb. 26 (for the year ended Jan. 26, 2025), one all-important question needs to be answered: Can this parabolic run-up continue? Though most investors will home in on Nvidia's sales and profit growth as indicators of the company's future success, another figure provides a clear answer to this key question. How Nvidia became Wall Street's most important stock Before any predictions can be made about the future, it's important to know how we got to where we are now. In other words, how Nvidia grew from a somewhat relevant tech company to the most important stock on Wall Street. Nvidia's parabolic climb is a reflection of its market share dominance in AI-accelerated data centers. The 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. With orders for the ultra-popular Hopper (H100) chip and successor Blackwell GPU architecture backlogged, there's a good chance Nvidia maintained its monopoly like market share last year. Working hand-in-hand with the otherworldly demand for Nvidia's hardware is AI-GPU scarcity. When an in-demand product is in short supply, the price of said product tends to rise. In Nvidia's case, it was netting upwards of $40,000 for its Hopper chip in early 2024, which is considerably more than the $10,000 to $15,000 price tag that accompanied Advanced Micro Devices (AMD -3.84%) Instinct MI300X AI-accelerating chips. Nvidia's CUDA software platform has played a key role in its success, too. CUDA is the toolkit developers use to get the most out of their GPUs. Whether developers are maximizing computing potential or building a large language model, CUDA has helped keep Nvidia's customers loyal to its ecosystem of products and services. Lastly, Nvidia has benefited from high-profile orders. Most members of the "Magnificent Seven" have placed sizable orders with Wall Street's AI darling, which validates that its data center hardware is the preferred choice. The sustainability of Nvidia's parabolic climb rests with one operating figure With a better understanding of how Nvidia catapulted to a $3.3 trillion valuation, let's return to the question at hand: Can this parabolic run-up continue? If this question were solely based on revenue growth, the answer might be yes. Nvidia recorded $27 billion in full-year sales in fiscal 2023 and could top $200 billion in revenue three years later. But there's a far more-encompassing operating figure that tells the tale of what's to come for Nvidia -- and it firmly suggests the music is slowing down and the party is nearing its end. When seemingly everyone is surfing through Nvidia's fourth-quarter operating results for its sales and profit figures after the market closes on Feb. 26, my suggestion would be to pay especially close attention to the company's gross profit margin. As noted, AI-GPU scarcity has worked in its favor. Nvidia is charging a sizable premium for its Hopper and Blackwell chips, relative to its competition, which in turn helped to lift its generally accepted accounting principles (GAAP) gross margin to a peak of 78.4% in the fiscal first quarter of 2025. NVDA Gross Profit Margin (Quarterly) data by YCharts. But since the fiscal first quarter, Nvidia's GAAP gross margin has been contracting. It came in at 75.1% in the fiscal second quarter, 74.6% in the fiscal third quarter, and the company's guidance in November called for a 73% GAAP gross margin (+/- 50 basis points) for the fiscal fourth quarter. This (expected) three-quarter decline in GAAP gross margin is a pretty clear indication that competition is finally picking up. Even though Nvidia is in no danger of losing its leading market share in AI-data centers, the ongoing production ramp from AMD and other direct competitors will (pardon the pun) chip away at the AI-GPU scarcity that's fueled Nvidia's phenomenal pricing power. To add to this point, Nvidia is contending with internal competitive pressure. The same Mag-7 companies it's selling boatloads of GPUs to are internally developing their own AI chips for use in their data centers. Even if these internally developed chips fall short of Nvidia's hardware in terms of computing speed, they'll be significantly cheaper and not backlogged. These internally developed GPUs will weigh on Nvidia's pricing power as well. There's also the possibility of customers opting for slower (i.e., lower margin) AI chips in future quarters. China's DeepSeek claims to have developed a large language model chatbot using slower Nvidia chips and at a fraction of the cost to what the Mag-7 companies are spending on AI GPUs. While this isn't something that'll show up in Nvidia's fourth-quarter operating results, it might weigh down the company's fiscal 2026 full-year GAAP gross margin outlook. Nvidia's gross margin will tell the tale of whether or not its parabolic move higher is sustainable.

Billionaire Money Managers Weighed In on Nvidia Long Before It Released Its Full-Year Results -- and Their Sentiment Couldn't Be Clearer | The Motley Fool

Some of Wall Street's most prominent asset managers have spoken volumes with their trading activity. Data isn't hard to come by on Wall Street. Between earnings season -- the six-week period each quarter where the vast majority of S&P 500 companies unveil their operating results -- and economic data releases from the U.S. government, investors are rarely struggling for catalysts that can move the broader market. But among these market-moving data dumps, nothing has been more anticipated than Nvidia (NVDA 3.67%) lifting the hood on its fiscal fourth-quarter and full-year operating results (Nvidia's fiscal 2025 ended on Jan. 26, 2025) following the closing bell on Feb. 26. Nvidia has been the face of the artificial intelligence (AI) revolution for the last two years. The company's Hopper (H100) graphics processing unit (GPU) and next-generation Blackwell GPU architecture are the undisputed top options in enterprise AI-accelerated data centers, and are what allow AI software and systems to make split-second decisions. Although investors should have a good bead on what to expect from Nvidia following the release of its operating results, as of this writing on Feb. 25, we've already witnessed a number of billionaire money managers weigh in -- and their sentiment regarding Wall Street's AI darling couldn't be clearer. In addition to publicly traded companies reporting their operating results on a quarterly basis, institutional investors with at least $100 million in assets under management are required to file Form 13F with the Securities and Exchange Commission no later than 45 calendar days following the end to a quarter. A 13F provides a snapshot that allows investors to see which stocks Wall Street's most prominent money managers have been buying and selling. Even though these filings are stale for active hedge funds, they can still clue investors into the stocks, industries, sectors, and trends that have the full attention of top-tier asset managers. As you can imagine, Nvidia's historic ascent tied to the AI revolution made it a popular company for billionaire investors to keep an eye on. But based on 13F filings over the last two years, billionaire money managers have been decisive sellers of Nvidia stock. Note: All figures below have been adjusted for Nvidia's historic 10-for-1 forward stock split in June 2024. The "why?" behind this persistent selling activity can likely be explained by five factors. The most-logical of all reasons for these four billionaire investors to ring the register is simple profit-taking. These are relatively active fund managers who likely recognize that Nvidia's roughly $3 trillion increase in market value isn't something that happens to public companies on a regular basis. The worry is that this selling is tied to much more than just simple profit-taking. A second possibility is that billionaire fund managers were concerned about an inevitable uptick in competition for Nvidia. Interestingly, while direct competitors tend to get the most attention, internal competitive pressure might be the bigger concern. Many of Nvidia's top customers by net sales are developing their own AI chips, with the goal of using this hardware in their AI-accelerated data centers. Even if these AI GPUs fail to match Nvidia's chips in terms of computing speed, they'll be notably cheaper and not backlogged. In other words, Nvidia is at serious risk of losing out on valuable data center real estate with its top customers and seeing its pricing power weaken over time. The regulatory environment for AI chips and related equipment marks a third potential sell-side catalyst for billionaire money managers. The Joe Biden administration clamped down on exports of high-powered AI chips to China from 2022 through 2024. Donald Trump's administration seems intent on keeping America's AI intellectual property protected from the world's No. 2 economy. This means billions of dollars of Nvidia's quarterly sales to China are now at risk. Historic precedent is the fourth worry that may have encouraged Laffont, Tepper, Druckenmiller, and Mandel to head for the exit. Every next-big-thing technology for three decades has navigated its way through a bubble-bursting event early in its existence. This is a reflection of investors consistently overestimating the adoption rate and/or utility of a new innovation. If history were to rhyme and the AI bubble bursts, no company would, arguably, be hit harder than Nvidia. The fifth catalyst that may be responsible for spurring aggressive selling activity by billionaire fund managers is Nvidia's valuation. While it's not egregiously expensive on the basis of forward-year earnings, Nvidia's price-to-sales (P/S) ratio peaked at more than 42 last summer. Businesses that have been on the leading edge of next-big-thing trends have often peaked at respective P/S ratios of roughly 30 to 40 over the last three decades. Although all eyes have been on Nvidia's operating results for weeks, billionaire investors spoke with their wallets long before the company's full-year report came into focus.

Is Nvidia a Bargain Buy Before Feb. 26? The Evidence Is Piling Up and Here's What It Shows. | The Motley Fool

Nvidia (NVDA -4.05%) has been one of the best-performing stocks on the planet in recent years. In fact, over the past two years, it's soared more than 800%. There's a clear reason for this. The company has created an artificial intelligence (AI) empire, making itself the "go to" player for any customer aiming to build an AI platform. From chips to software, Nvidia has it all -- and this has helped the company deliver double- and triple-digit revenue growth quarter after quarter. A few weeks ago, though, news from Chinese start-up DeepSeek pummeled Nvidia stock, leading to a 16% decline in one trading session. DeepSeek said it successfully trained its model using Nvidia's lower-performance chips -- and investors worried that other Nvidia customers would follow, hurting the tech giant's revenue growth. The drop in Nvidia stock pushed valuation to its lowest level in a year, leaving Nvidia in bargain territory. Now the question is: Is Nvidia a bargain buy before its next big catalyst on Feb. 26, when it reports performance? The evidence is piling up, and here's what it shows. Nvidia's AI strengths started with its graphics processing units (GPUs), powerful chips that process multiple tasks simultaneously. The company used to primarily sell them to the video gaming market, then expanded into other areas -- including AI. These GPUs quickly dominated the AI space, and Nvidia broadened its offerings to include an entire suite of AI products and services. All of this has made Nvidia the AI market leader, attracting billions of dollars in business from the world's biggest tech companies, such as Meta Platforms, Microsoft, and Alphabet, just to name a few. And this brings me to the DeepSeek news that weighed on Nvidia stock in recent weeks. As I mentioned earlier, since DeepSeek was reportedly able to train a model with a cheaper, lower-performance Nvidia chip, investors speculated that tech giants may go that route, too. That could hurt demand for Nvidia's most recently launched products and be disastrous for Nvidia's revenue and profit. Now, let's look to the catalyst ahead and consider what the latest evidence is telling us about the company and the stock. On Feb. 26, Nvidia will report fourth-quarter and fiscal 2025 full-year earnings. And, importantly, investors will get the latest update on the company's release of a potentially game-changing product: its new Blackwell architecture. Nvidia released Blackwell during the fourth quarter and predicted it would bring in several billion dollars in revenue right out of the gate. Blackwell is a customizable architecture including several different chips and networking configurations and more. It's designed to help customers gain in efficiency and includes many features to boost performance, making improvements in system reliability and security, for example. Two very clear pieces of evidence regarding Nvidia's future have to do with demand. In recent weeks, top Nvidia customers such as Meta and Alphabet have announced increased AI spending, suggesting the DeepSeek news didn't prompt them to change their plans about investment in this area. Meta chief Mark Zuckerberg spoke of "the hundreds of billions of dollars that we will invest in AI infrastructure over the long term" during his company's earnings call. Alphabet said that in 2025 it expects $75 billion in capital expenditures, and much of this will support AI growth. And in recent days, Wedbush analyst Dan Ives said he and his team have spoken with Nvidia AI customers, and none of them have changed AI investment plans. The DeepSeek news apparently didn't weigh on demand for Nvidia's latest chips either -- demand still surpasses supply. Finally, a look at stock performance after the latest earnings reports shows that Nvidia stock fell two times out of three in the month following the earnings announcement. Nvidia shares don't necessarily soar immediately after the company's earnings reports -- even though each time they've been positive and surpassed analysts' estimates. So, if history is a guide, Nvidia stock may not rise in the month after a strong earnings report. Now, let's get back to our question: Is Nvidia a bargain buy before Feb. 26? The evidence above shows that, while it's possible the stock may stagnate or fall after the report, there still may be plenty of good news to trigger gains. And even if Nvidia stock doesn't score an immediate gain, it's likely to win over the long term. Demand for the company's products remains strong, the DeepSeek news hasn't changed Nvidia's growth story, and today Nvidia trades at bargain levels -- at 31 times forward earnings estimates. All of this means Nvidia makes a great AI stock to buy ahead of Feb. 26. If the stock rises or falls after the report, that's OK. What's most important is this player has the earnings strength to help the shares roar higher in the quarters and years to come.

3 Reasons Nvidia Is a Must-Buy for Long-Term Investors | The Motley Fool

Nvidia (NVDA -4.05%) has been one of the best-performing stocks over the past few years. However, with artificial intelligence (AI) still looking like it is in its early days, the stock looks like it should continue to be a winner over the long term. Let's look at three reasons Nvidia is a must-buy for long-term investors. The biggest driver of Nvidia's growth will continue to come from AI infrastructure spending. The company's graphics processing units (GPUs) have become the backbone of AI training and inference and, as such, tend to greatly benefit from increased AI infrastructure spending. Major tech companies and AI start-ups in the U.S. have needed exponentially more computing power and, thus, GPUs to train their AI models to make them more advanced. This can be seen in Meta Platforms using 10 times the GPUs to train its Llama 4 model compared to its Llama 3 model and Elon Musk-backed xAI training its latest AI model by ramping up the GPUs from 20,000 GPUs used to train Grok 2 to eventually 200,000 GPUs to finish Grok 3's training. China's DeepSeek AI model, which the company claimed was trained for less than $6 million, has raised some questions about future spending. Leading tech cloud computing companies such as Amazon stated that lower per-unit AI costs would lead to increased AI infrastructure spending. Meanwhile, experts have questioned the true costs of building DeepSeek's model, with independent semiconductor research company SemiAnalysis estimating it really cost closer to $1.3 billion to develop. At the same time, the big three cloud computing companies are greatly ramping up AI infrastructure spending this year. Combined, Amazon, Microsoft, and Alphabet plan to spend more than $250 billion in growth capital expenditure (capex) in 2025, mostly on AI infrastructure. Meanwhile, Meta Platforms has said it is looking to boost its growth capex to between $60 billion and $65 billion, up from $39 billion in 2024. In addition, a consortium of companies backed by Japan's SoftBank pledged to spend $500 billion on AI infrastructure in the next few years in the U.S. as part of Project Stargate. Right now, AI infrastructure spending is only increasing, and Nvidia looks poised to be the biggest winner. Nvidia is a big AI winner because of its dominant market position in GPUs, with an approximate 90% market share. This dominance stems from the wide moat the company has created through its CUDA software platform. GPUs were originally designed to help speed up graphics rendering in video games, hence their name. However, Nvidia developed its CUDA software platform back around 2006 to allow developers to program its chips for other tasks. As such, developers learned to program GPUs using CUDA, making it the standard platform for programming GPUs for tasks other than video games. Over the years, Nvidia expanded its software lead through CUDA X, a set of microservices, libraries, tools, and technologies designed specifically for AI and high-performance computing built on top of CUDA. SemiAnalysis highlighted Nvidia's wide moat at the end of 2024 when it tested its GPUs against Advanced Micro Devices' (AMD -2.92%) MI300X GPU. It said it needed multiple AMD engineers to fix software bugs it ran into and that its chip was not usable out of the box for AI training. Meanwhile, it called Nvidia's out-of-the-box experience "amazing." Nvidia isn't sitting still, though. The company has upped its development cycle from every two years to about once a year to continue to drive innovation and stay on top while continuing to improve its software. This should continue to give the company solid pricing power moving forward. Despite Nvidia's strong performance over the past few years, its stock is still attractively priced. It trades at a forward price-to-earnings (P/E) ratio of 25 times 2025 analysts' estimates and a price/earnings-to-growth (PEG) of 0.5. PEGs below 1 usually indicate a stock is undervalued, while growth stocks often have PEGs well above 1. Meanwhile, Nvidia has been a growth machine, with the company set to more than double its revenue for the second year in a row in its fiscal 2025 (ending in January). Analysts are currently looking for the company to grow revenue by more than 50% in fiscal 2026 and another 20% in fiscal 2027. All in all, Nvidia continues to have a huge opportunity in front of it while the stock remains attractively priced. That makes it a buy for long-term investors.

Nvidia: A Bumpy Road Ahead This Year, But I'm Still Bullish Over The Longer Term (NVDA)

I reiterate my "Buy" rating on NVDA stock due to the promising developments in AI that may continue to sustain the long-term growth of Nvidia's business. Looking at the market's reaction to the latest NVIDIA Corporation's (NASDAQ:NVDA) Q4 earnings, we can surely conclude that even great results aren't enough for the market nowadays. To be fully fair, it doesn't seem In the investment world, there's no lack of analysis. However, there's a catastrophic lack of sensible, unbiased, actionable analysis. I want to be one of those who change that for the better.My email: danil (dot) kolyako (at) gmail.com. Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Nvidia: The Shift Towards Reasoning Models And The Importance Of Hedging (NASDAQ:NVDA)

I would caution that NVDA stock's high beta makes it vulnerable to broader market declines, warranting hedging strategies like deep OTM puts to manage downside risks. NVIDIA Corporation (NASDAQ:NVDA) has once more proven that demand for AI is advancing at a steady high pace, reflected in the record Q4 & FY25 earnings results and in CEO Jensen Huang's optimistic tone Small deep value individual investor, with a modest private investment portfolio, split approx. 50%-50% between shares and call options. I have a B.Sc. in aeronautical engineering and over 6 years of experience as an engineering consultant in the aerospace sector. The latter statement is not relevant in any way whatsoever to my investment style, but I thought to add it for self-indulgent purposes. I have a contrarian investment style, highly risky, and often dealing with illiquid options. How illiquid? Well, you can land a Jumbo on the spread and still have clearance for take-off. From time to time, I buy shares, mostly to not be categorized as a degen by my fellow investor friends, therefore the 50%-50% allocation. My timeframe tends to be between 3-24 months.I like stocks that have experienced a recent sell-off due to non-recurrent events, particularly when insiders are buying shares at the new lower price. This is how I often screen through thousands of stocks, mainly in the US, although I may own shares in banana republics. I use fundamental analysis to check the health of companies that pass through my screening process, their leverage, and then compare their financial ratios with the sector, and industry median and average. I also do professional background checks of each insider who purchased shares after the recent sell-off. I use technical analysis to optimize the entry and exit points of my positions. I mainly use multicolor lines for support and resistance levels on weekly charts. From time to time I draw trend lines, taken for granted, in multicolor patterns. Note: I tried to keep my introduction as real, and authentic as possible. I dislike empty suits, high-level BS, deep-level BS, unnecessary jargon, and self-indulgent, third-person written introductions with an air of superiority.Thanks for reading my introduction! Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Microsoft's Satya Nadella Just Gave Nvidia Stock a Reality Check | The Motley Fool

Tech giants are going all-in on artificial intelligence (AI). Microsoft (MSFT -1.90%) recently announced plans to spend $80 billion this year building out AI data centers to support training advanced AI models and deploying those models to the cloud. Meta Platforms is following suit, with up to $65 billion allocated for AI infrastructure in 2025. Not to be outdone, Amazon has upped its capital spending plan to $100 billion for the year, although not all of this will go toward AI computing capacity. Lastly, Alphabet boosted its capital spending plan to $75 billion for 2025, with much of that related to AI. On top of all this spending, the Trump Administration's Stargate project involves another $500 billion in AI investments over the next four years, and the European Union is aiming to mobilize 200 billion euros ($209 billion) for AI investments. Long story short, an enormous amount of capital is rapidly being spent on AI data centers and the necessary equipment to train and run powerful AI models, particularly graphics processing units (GPUs) from Nvidia (NVDA -4.05%). Demand for Nvidia's data center GPUs will likely remain strong for the time being as companies and governments go wild on AI spending. What happens after that? It depends on whether demand for AI computing capacity rises to meet an exploding amount of supply. In a recent interview, Microsoft CEO Satya Nadella said something curious that should give Nvidia investors pause. While Microsoft is investing heavily in AI computing capacity, Nadella essentially predicted an oversupply sometime in the next few years. The company plans to lease "a lot of capacity" in 2027 and 2028 rather than build out additional capacity of its own. Here's the kicker: "Because I look at the builds, and I'm saying, 'This is fantastic.' The only thing that's going to happen with all the compute build is the prices are going to come down." One way a bubble can form is through overinvestment. Companies and governments are building out massive quantities of AI computing capacity independently without any real idea of what demand will look like a few years from now. It won't take much of a miscalculation for supply to greatly exceed demand once this current build-out is complete. The closest historical parallel to this AI spending bonanza is not the dot-com bubble but the railroad bubble of the late 1800s. Far too much capital was spent building out railroad capacity, leading to an enormous oversupply that sent railroads into bankruptcy and helped trigger a financial panic. The railroad, like AI, was a revolutionary technology that fundamentally changed the world, but that fact didn't save investors. In an oversupply scenario, prices for AI computing will plunge. That's great for anyone renting AI computing capacity and terrible for anyone owning it. In theory, cheaper access to AI computing could drive up demand. However, there's a limit to this effect. An oversupply of railroads didn't lead to people taking more trips or shipping more freight to fully match that supply. Trees don't grow to the sky, after all. For Nvidia, AI oversupply is a double whammy. Not only would the pricing of its powerful data center GPUs come under pressure, but demand would also fall off a cliff. If there's too much AI computing capacity, demand will come mostly from maintaining existing infrastructure rather than expansion. There's also the complication that a growing number of tech giants are designing their own AI chips. OpenAI is the latest to reportedly jump on the bandwagon as it aims to lower its dependence on Nvidia. The trillion-dollar question is whether demand for AI computing capacity can possibly rise enough to absorb the enormous supply coming online over the next few years. The fate of Nvidia stock hangs in the balance. Microsoft is taking a smart approach to AI investment. The company is still building out plenty of capacity, but it's taking care not to overdo it. By planning to lease a lot of capacity down the road, Microsoft is taking quite a bit of risk off the table. If Nadella is right about AI oversupply, it's hard to see how Nvidia's revenue and profit can grow at a quick enough pace to justify a multitrillion-dollar valuation. The short term may look bright for the GPU leader as AI investments explode, but the longer-term picture isn't as clear. If we truly are witnessing a massive AI overinvestment cycle, Nvidia stock will come under some serious pressure sooner or later.

Is Nvidia Stock a Buy, Sell, or Hold in 2025? | The Motley Fool

With shares up less than 3% year to date as of the time of this writing, Nvidia's (NVDA -4.05%) rocket ship rally has ended. And there are many reasons why investors are becoming more cautious about the stock. Generative AI software is still deeply unprofitable. And the emergence of reportedly cheaper open-source rivals from China could undermine top Nvidia customers like OpenAI and Meta Platforms. Let's dig deeper to see if shares in this tech giant are a buy, sell, or hold in 2025 and beyond. Nvidia is expected to report its fourth-quarter and full-year earnings after the market closes on Feb. 26. This report will give investors a clearer picture of its growth prospects and the health of the AI industry as it grapples with challenges like high spending and low profitability on the software side (OpenAI lost $5 billion in 2024). Management seems optimistic, guiding for around $37.5 billion in revenue, representing a 70% year-over-year growth rate compared to the prior-year period. This would be a deceleration in growth compared to last year's revenue surge of 265%, but it is impressive for a $3.4 trillion company. For comparison, fellow tech giant Amazon posted top-line growth of just 10% in its most recently reported quarter. Nvidia's dominance relies on its ability to release new and improved graphics processing units (GPUs) for running and training AI models. These products are costly (the company's latest Blackwell chips are expected to cost between $30,000 and $40,000 per unit), but they offer such dramatic performance improvements that they may still provide operational cost and energy savings compared to older chip designs. The release of an open-source large language model (LLM) called DeepSeek R1 has shaken Nvidia's growth thesis. The Chinese app reportedly can outperform industry leader ChatGPT on key tasks despite being reputedly developed for just $5.6 million using Nvidia's much less advanced H800 chips, built to comply with U.S. export restrictions to China. If companies can create cutting-edge LLMs using less-advanced chips, this could undermine the market for Nvidia's most advanced hardware, potentially hurting its growth and margins. That said, there may be some good news for Nvidia and its shareholders. For starters, Nvidia's fiscal fourth-quarter report contains data from the three months ending in January 2025. DeepSeek's R1 was released late in the last month of the period and probably won't materially impact guidance. Furthermore, experts have disputed some of DeepSeek's claims, with a report from research and analysis company SemiAnalysis estimating that its hardware spending was higher than $500 million instead of the $5.6 million its developers claim. The app also faces increasing regulatory attention over data safety and has already been banned from South Korean app stores due to privacy concerns. Some of Nvidia's biggest customers, such as Meta Platforms, maintained their commitments to buying AI hardware. Meta doesn't plan to slow its AI spending despite the potential threat from DeepSeek. CEO Mark Zuckerberg expects to invest hundreds of billions of dollars in the industry over the long term. DeepSeek doesn't look like it will hurt Nvidia's momentum in the fiscal fourth quarter or calendar year 2025. And the release of new Blackwell AI chips will help the company maintain its elevated growth rate. With a forward price-to-earnings ratio (P/E) of 32, the stock remains reasonably priced compared to its fundamentals. That said, the stock still looks like a hold instead of a buy. While DeepSeek won't immediately pop the generative AI bubble, it is a warning about vulnerability -- especially as top LLM developers like ChatGPT remain unprofitable. Nvidia's low valuation is attractive, but it makes sense, considering the industry's speculative and risky nature.

Prediction: 1 Artificial Intelligence (AI) Stock That Will Be Worth More Than Nvidia 5 Years From Now | The Motley Fool

Demand for chips that power artificial intelligence (AI) could eventually slow. The past few years have marked a paradigm shift in technology thanks to recent advances in artificial intelligence (AI). A quick look at the list of the world's most valuable companies by market cap helps to illustrate the shift. Eight of the top 10 are among the world's most recognized purveyors of technology -- and each of them has deep ties to AI. Nvidia's (NVDA 0.63%) graphics processing units (GPUs) supply the computational horsepower that makes generative AI possible and has ridden the accelerating wave of adoption to new heights. With a market cap of $3.4 trillion, its value is exceeded only by Apple at nearly $3.7 trillion (as of this writing). The future looks bright for Nvidia, as the company's largest customers have committed to invest a combined $315 billion in capital expenditures in 2025. The vast majority of that spending is allocated to the servers and data centers needed to support AI. As the leading provider of data center GPUs, Nvidia will capture a large portion of that spending. Despite its stock gaining 1,780% over the past five years, it's unlikely Nvidia will be able to repeat its performance over the next half decade, and some investors are looking ahead to the next stage of AI adoption. One company that has multiple ways to win in an AI-centric future is Amazon (AMZN -1.65%). Many companies are still figuring out how best to profit from AI, but Amazon is already in a league of its own. The online retailer has long used AI to enhance and improve its existing businesses. Yet Amazon has only just begun to exploit the opportunity represented by AI. CEO Andy Jassy said that developments in the field of AI-powered robotics "simplify stowing, picking, packing, and shipping processes." These advances have helped reduce fulfillment processing times by up to 25%. Fulfillment costs accounted for more than 17% of Amazon's operating expenses in 2024, so these improvements will help expand the company's bottom line and boost profits. Let's not forget Amazon Web Services (AWS), the company's cloud infrastructure platform. AWS has long generated the lion's share of Amazon's profits, accounting for 58% of its operating income last year. The company has worked diligently to maintain its industry-leading cloud position. To that end, Amazon has introduced its home-grown Trainium and Inferentia AI processors, which offer cloud customers more bang for the buck. AWS isn't stopping there. In addition to offering customers all of the most in-demand AI models, it offers Amazon SageMaker AI, which helps developers build, train, and deploy their own AI models. Jassy recently noted (emphasis mine) that "In the past 18 months, AWS has released nearly twice as many machine learning and generative AI features as the other leading cloud providers combined." Amazon is also using AI to inform the targeted advertising that appears on its e-commerce site, within Prime Music, and on its Freevee streaming service. Furthermore, advertising is now standard for Amazon Prime Video. Viewers can opt out of the ads for $3 per month or $36 per year. This captive audience gives Amazon growing leverage with advertisers, which is why its advertising segment has been its fastest growing business over the past year. Nvidia currently sports a market cap of $3.4 trillion, compared to $2.4 trillion for Amazon. Mathematically speaking, it would take a stock price increase of 42% for Amazon to surpass Nvidia. Alternatively, it would take a stock price decline of 30% for Nvidia. The reality isn't as simple as either of these, as neither stock price will be static. Wall Street is forecasting that Amazon will generate revenue of $699 billion in 2025, giving it a forward price-to-sales (P/S) ratio of roughly 3.4. Assuming its P/S remains constant, Amazon would have to grow its revenue to roughly $990 billion annually to support a $3.4 trillion market cap. Assuming it maintains its current growth rate of 10%, Amazon could cross that threshold by mid-2029. Even more modest growth of 7% annually would still achieve that goal by 2030. Nvidia has generated remarkable growth since the advent of AI. In fact, over the past three years, its stock price has gained 489% (as of this writing). The company has benefited from an unprecedented data center buildout, which requires a vast number of its AI-centric chips. Yet what the market gives, the market can take away. Three times over the past year alone, Nvidia stock has fallen between 20% and 25%, driven by reports of challenges with its next-generation AI chips and the potential for sinking demand for its processors. If there's an actual decline in demand, investors would reset their expectations and adjust Nvidia's multiple -- and its stock price -- accordingly. Don't get me wrong. I'm a died-in-the-wool Nvidia bull, and the stock is my second largest individual holding, but a lot can happen in five years. I believe it's entirely possible that Amazon's combination of digital retail, cloud computing, digital advertising -- and the expansion of its AI offerings -- could be enough to propel the stock past Nvidia by 2030. Yet despite its remarkable track record and multipronged growth opportunity, Amazon stock is selling for just 35 times next year's earnings -- a reasonable valuation for a company with so many ways to win.

Better Artificial Intelligence Stock: AMD vs. Nvidia | The Motley Fool

Artificial intelligence (AI) has been a hot sector to invest in, helping the stock market reach new highs in 2024. Two of the biggest beneficiaries from the rise of AI are semiconductor giants Advanced Micro Devices (AMD -2.92%) and its chief rival Nvidia (NVDA -4.05%). Both sell graphics processing units (GPUs), the hardware used in data centers to enable artificial intelligence. AI systems must sift through mountains of data, and the GPU is the component that makes this data-intensive task possible. GPU sales propelled AMD and Nvidia revenue to record highs. The pair is positioned for more growth as tech companies construct data centers to house AI systems. For instance, Facebook parent Meta Platforms is building a data center the size of a small city. The amount of hardware required for such gigantic data centers suggests AMD and Nvidia's future sales growth is likely to remain high, so owning shares in both is ideal. But if you had to choose just one, which semiconductor company is the better AI investment for the long haul? Here's a look at each to arrive at an answer. AMD's sales growth has been remarkable due to the current AI frenzy. To give you a sense for what that means, in its fiscal fourth quarter ended Dec. 28, the company's sales to the data center market increased 69% year over year to a record $3.9 billion. This helped AMD's total Q4 revenue to grow 24% year over year to $7.7 billion. The firm also boasted a strong Q4 balance sheet. Its total assets of $69.2 billion eclipsed total liabilities of $11.7 billion. Despite these excellent results, AMD stock has been declining for weeks. This began in earnest after Wall Street was rattled by the appearance of Chinese AI start-up DeepSeek on Jan. 27. DeepSeek purportedly produced an AI chatbot for less than $6 million. That's a fraction of the billions of dollars spent by U.S. firms to build their AI, raising concern AMD's sales could falter. On this topic, AMD CEO Lisa Su stated, "Specifically relative to DeepSeek, look, we think that innovation on the models and the algorithms is good for AI adoption." In short, she believes lower-cost AI means more organizations can afford to adopt the tech, translating into increased customer demand for AMD products over the long term. Nvidia stock was not immune to DeepSeek's arrival, dropping alongside its semiconductor brethren. Nvidia shares have since bounced back, which makes sense because its business shows no signs of slowing down. In its fiscal third quarter ended Oct. 27, the company's revenue reached a record $35.1 billion, a 94% year-over-year increase. Like AMD, Nvidia's spectacular sales gains were thanks to its data center business. This division contributed $30.8 billion in Q3 sales, representing 112% year-over-year growth. Nvidia's sales are expected to continue rising. The company forecast fiscal Q4 revenue of about $37.5 billion. That's a 70% jump from the prior year's $22.1 billion. The company reports its Q4 results on Feb. 26. Moreover, Nvidia is a participant in the U.S. government's Stargate program, which plans to invest half a trillion dollars into AI infrastructure. This should boost Nvidia's revenue growth further as the project unfolds. The company's sales success led to strong financials. Nvidia's Q3 balance sheet included $96 billion in total assets versus $30 billion in total liabilities. Its Q3 gross margin of 75% was excellent, far better than AMD's Q4 margin of 51%. This metric indicates Nvidia's effectively managing costs, thereby improving profits. Both AMD and Nvidia offer reasons to invest, given their healthy businesses and rising sales. So let's turn to another key consideration to decide between the two: valuation. To do so, we'll use the price-to-earnings (P/E) ratio, a metric which tells you how much investors are willing to pay for a dollar's worth of earnings. AMD's P/E multiple has dropped substantially over the last year, indicating it's a better value now than in the past. This decline reflects the fall in its share price, which took a hit not only due to DeepSeek's arrival, but also because its Q4 data center results failed to meet Wall Street's lofty expectations. Despite the drop, in comparing AMD's P/E ratio to its rival, it's still more than double Nvidia's at the time of writing. This makes Nvidia stock the better value. Also, while I admire AMD's Lisa Su, Nvidia's prescient CEO and founder, Jensen Huang, foresaw the need for GPUs back in 1999, which established his company as the leader in the space. Now Nvidia dominates the AI semiconductor market with an estimated GPU market share of 90%. Huang also recognized the GPU was applicable to AI, giving the first supercomputer specifically designed for artificial intelligence to OpenAI in 2016. OpenAI then went on to create ChatGPT, setting off the current AI frenzy. When you put together Jensen Huang's visionary leadership, Nvidia's track record of AI success, and its superior stock valuation, Nvidia comes out the winner as the better long-term investment in AI.