Nvidia Stock: A Comprehensive Analysis of Its Current Position and Future Prospects

Is Nvidia a Buy? | The Motley Fool

The question on many investors' minds is whether Nvidia (NVDA -1.95%), one of the best-performing stocks in the market, is still a buy after its huge run-up the past five years. For those who missed out on buying the stock, let's look at five reasons that I think the answer is still yes. Currently there is a race among big technology companies to build data centers designed to handle artificial intelligence (AI). This is a handful of some of the biggest names in tech. While investors might not always be fans of their spending plans, capital expenditure (capex) budgets for these tech leaders are on the rise. The big names that are spending on AI infrastructure include cloud computing stalwarts Microsoft, Amazon, Alphabet, and companies like Meta Platforms, Oracle, OpenAI, and Elon Musk's Tesla and xAI. Both Alphabet and Meta Platforms have come out and said that the biggest risk with their AI infrastructure build-outs is underinvesting, given the huge opportunity AI presents. Musk, meanwhile, built his own data center for xAI because Oracle couldn't produce the AI cluster it needed fast enough. And while these large tech companies duke it out, the one company best positioned to continue to reap the rewards is Nvidia, which through the sale of its graphics processing units (GPUs) is essentially the arms dealer in the battle for AI supremacy. As these companies build their AI infrastructure, there is no sign that this spending will let up. The big reason is that as large language models (LLMs) advance, they need more computing power to be trained on. And they won't need a few more GPUs for training -- they will need exponentially more. For example, xAI's Grok 2 model used 20,000 GPUs to train, while its Grok 3 model will use 100,000. Meta Platforms has said its next-generation Llama 4 model will likely need 10 times the computing power as Llama 3. That would bring the number of GPUs required to train the model up to 160,000. On its recent earnings call, Oracle said it sees no end in sight, saying investors should have no worries about spending on AI training slowing down over the next five to 10 years. The company predicted there would be no slowdown in the shift toward spending on AI inference, which is less computing-intensive. Against this backdrop, Nvidia appears to have a long runway of growth. Nvidia isn't the only maker of GPUs. Advanced Micro Devices is its biggest rival, while Broadcom helps make custom chips for companies like Alphabet and Meta. However, Nvidia commands a more than 80% market share in the GPU space. In its second-quarter results, data center GPU revenue surged 154% year over year to $26.2 billion. AMD's data center revenue rose 115% to $2.8 billion in the second quarter. Nvidia's dominance largely stems from the wide moat the company has created through its CUDA software platform, which is what most GPU programmers have been taught to use. Created in 2006 for developers to be able to directly program its GPUs, the company gave the software away in order to sell more chips. In the years since, Nvidia has built a number of tools and technologies on top of CUDA called CUDA-X to expand its software leadership even further. With Nvidia's software so ingrained in the GPU programming community, it would be difficult to displace the company as the GPU leader at this point, since the time and cost to retrain programmers on other platforms would be too great. In addition to its wide moat created by its software, Nvidia is also at the forefront of GPU technology. The company recently decided to push up its development cycle in order to introduce new GPU architecture about every year, up from a prior two-year development cycle. The company's current-generation Hopper chips have been met with insatiable demand, but management is already set to begin rolling out new chips based on its Blackwell architecture by year end. Nvidia has already announced plans for its next-generation Rubin architecture in 2026. This fast pace is meant to keep the company at the forefront of innovation, while also maintaining pricing power. Meanwhile, all of its architecture is backwards compatible and can work with older systems, so customers don't need to worry about large orders quickly becoming obsolete. The company has also started selling complete AI-ready servers, which only adds to its potential growth opportunity. Besides the company's strong growth prospects and wide moat, Nvidia's stock is cheap as well. It trades at a forward price-to-earnings ratio (P/E) of only about 30 based on next year's analyst estimate, and a price/earnings-to-growth ratio (PEG) just above 0.8. PEG ratios take into account a company's earnings growth rate, and stocks with PEG ratios under 1 are generally considered undervalued. High growth stocks will often command multiples well above 1. So for a stock with the earnings and revenue growth that Nvidia has been demonstrating, a forward P/E of 30 and a PEG ratio of 0.8 is highly attractive. Also note that this is based on Nvidia's growth for next year, which is lower than its current astronomical earnings growth rate. Those are very modest valuation multiples for a company that has been growing revenue by triple digits recently and has a continued long runway of growth. So, to answer the question posed at the beginning: Yes, Nvidia is a buy.

Where Will Nvidia Stock Be in 1 Year? | The Motley Fool

It's no secret that excitement surrounding artificial intelligence (AI) has helped propel technology stocks, and the entire market, to new highs over the last year. It's also no secret that semiconductor stock Nvidia (NVDA -1.02%) has witnessed unparalleled buying activity -- so much so, that it's now the third most valuable company in the world as measured by market cap. But with shares soaring 140% so far in 2024 and 160% over the last 12 months, could Nvidia stock possibly be headed even higher? Below, I'll explore some factors that could support the ideas of Nvidia stock moving both higher or lower over the next year. Let's dig into the full picture and assess what could influence Nvidia's price action. I'll make my final case for where I see Nvidia stock landing one year from now. Over the last couple of years, one of the biggest catalysts for semiconductor companies is demand for graphics processing units (GPUs). GPUs are an integral component for training large language models (LLMs) and myriad machine learning applications. As it stands today, Nvidia is widely perceived as developing the best GPUs on the market. Its hardware roster featuring H100 and A100 chips is used by some of the largest companies in the world. Furthermore, Nvidia's next-generation GPUs, the Blackwell series, are finally set to hit the market following a brief setback due to a design flaw. During Nvidia's second-quarter fiscal 2025 earnings call, CFO Colette Kress said, "Demand for Blackwell platforms is well above supply, and we expect this to continue into next year." Kress said that Blackwell should generate "several billion dollars" of revenue during the fourth quarter. Considering the robust demand levels for Blackwell, I think it's reasonable to think that the bulk of these revenue tailwinds will trickle into fiscal 2026 (calendar year 2025). As a result, I would not be surprised at all to see Nvidia stock experience some revived buying activity throughout the latter half of 2024 and into early months of 2025. Even if Nvidia shares experience a nice pop, I think concerns around competition could dent any euphoria surrounding the stock. While Nvidia faces direct competition from the likes of Advanced Micro Devices, the company is also looking at rising opposition from other megacap tech companies. Some examples include: There are a couple of important ideas to unpack here. First, as more chips enter the competitive landscape, it's natural to think that Nvidia's growth could continue slowing. Moreover, a potentially bigger issue is that many companies seeking to disrupt Nvidia's dominance are its own customers. To me, GPUs will eventually be seen as commoditized pieces of hardware. This will essentially force Nvidia to compete on price, and since many of its largest sources of growth are looking to move away from a reliance on its hardware, the company's sales and profits could start witnessing a dramatic deceleration. This could lead to a normalization of Nvidia's stock price as its growth prospects become less attractive. In addition to competition, I see a couple of other things that could impact Nvidia's stock price. As I recently expressed, I have some major questions over the company's $50 billion share buyback. I do not see this as an efficient use of capital allocation, and I think it could permeate into a broader narrative that negatively impacts the stock. Furthermore, as murmurs continue about a possible investigation from the Department of Justice (DOJ) over antitrust concerns, it's very possible that some investors will dump Nvidia stock purely out of emotional fear. I will admit that the buyback and the possibility of government intervention are longer-term issues surrounding Nvidia, but I think the ideas of both could impact the stock in the near term. At the end of the day, I think Nvidia stock will experience a period of fleeting buying activity influenced by newfound growth inspired from Blackwell. However, I see these gains as short-lived as competition rises and question marks remain over the company's growth tactics. For this reason, I wouldn't be surprised if Nvidia stock is relatively flat overall one year from now.

Prediction: Nvidia Stock Could Hit $200 in 2025

The AI giant may have lost some momentum of late, but investors would do well to focus on the bigger picture. Nvidia (NVDA -0.83%) stock's breathtaking rally that began toward the end of 2022 has taken a hiatus of late. More specifically, shares of Nvidia have witnessed some volatility since the beginning of July, and the company's solid fiscal 2025 second-quarter results haven't been enough to inject some life into its fortunes on the stock market. The reasons behind Nvidia's recent volatility can be attributed to concerns about a slowdown in its growth, as well as the viability of artificial intelligence (AI) technology following the massive investments made in this space by companies and governments across the globe. However, Nvidia's quarterly results and bullish guidance make it clear that the company's impressive growth is here to stay. Moreover, a closer look at the consensus stock price target indicates analysts expect Nvidia stock to regain its mojo. Nvidia has a median 12-month price target of $150 as per 63 analysts covering the stock, which would be a 28% jump from current levels. However, the Street-high price target of $200 suggests that Nvidia stock could jump another 71% over the next year. Here's why this semiconductor company's shares could hit that mark in 2025. Nvidia's dominance in AI chips is going to be the driving force behind the stock Strategic advisory firm Constellation Research gave Nvidia stock a $200 price target in June this year. The firm points out that the semiconductor bellwether enjoys several advantages that could send its shares to $200 in the coming year and even help it sustain its rally for a longer period. Constellation says Nvidia has managed to create high barriers to entry in the AI chip market and has a robust product roadmap, while high switching costs mean that customers who are locked into its ecosystem are unlikely to move to a competing offering anytime soon. Because of these reasons, the research firm estimates Nvidia enjoys a technology lead of 24 months over its rivals in the AI graphics card market. A closer look at Nvidia's recent quarterly results will show that it is indeed the go-to supplier of graphics cards for companies and governments looking to train and deploy AI models. The company's revenue in the second quarter of fiscal 2025 shot up an impressive 122% year over year to $30 billion. The data center business produced $26.3 billion in revenue during the quarter, a jump of 154% from the same period last year. Nvidia CEO Jensen Huang pointed out that the demand for the company's graphics cards based on the Hopper architecture remains solid, with shipments expected to increase in the second half of the fiscal year. That's a testament to Nvidia's outstanding moat in the AI graphics processing unit (GPU) market as the company's next-generation Blackwell chips are already sampling with customers and are set to go into full production from the fourth quarter of the fiscal year. In other words, customers are still willing to purchase Nvidia's older AI chips even though the new ones are on the way, suggesting that its products are indeed superior to rivals such as AMD and Intel. For instance, Nvidia's Hopper H200 processor reportedly outperforms its AMD rival, MI300X, by more than 40% in AI inference applications. Considering that the H200 reportedly costs less than the MI300X, it is easy to see why Nvidia has been witnessing an improvement in the demand for this chip even though newer chips are on the way. Not surprisingly, Nvidia is likely to maintain its dominant position in the AI chip market. That's also helping the company maintain healthy pricing power and enjoy fat margins. For example, Nvidia's non-GAAP gross margin increased by 5 percentage points on a year-over-year basis last quarter to 75.1%. As a result, the company's adjusted earnings jumped 152% year over year to $0.68 per share, prompting analysts to increase their earnings projections for the current and the next fiscal year. The chart above indicates that Nvidia's earnings could hit $4 per share in the next fiscal year (which will coincide with the majority of calendar 2025). However, there is a good chance that its earnings could exceed that mark as analysts could continue to raise their growth expectations because of a potentially big jump in its data center revenue next year. Let's assume that Nvidia's earnings really do increase to $4 per share. That would be a 41% increase over its projected fiscal 2025 earnings. If the stock maintains its price-to-earnings ratio of 55 at that time, the stock price could jump to $220. It is worth noting that Nvidia is currently trading at a relative discount to its five-year average price-to-earnings ratio of 72. More importantly, this company can justify its valuation through impressive growth because of its robust position in the AI chip market. So, there is a good chance that this AI stock could resume its journey north and go past $200 next year.

Nvidia Stock is Down 10% From Its Highs. Is It Time to Buy the Dip?

Nvidia's (NVDA -1.95%) stock hasn't gone on sale often, but when it has dipped slightly since 2023, it has been a no-brainer buying opportunity for investors. While investors may have missed the bottom of the dip when it was down around 25%, is a 10% discount still a good enough price to pay? Nvidia stock is down 10% from its all-time high set in June. If you're considering Nvidia stock now, are you buying it for a 10% return or looking for something even bigger? Next quarter appears to be another strong one for Nvidia Nvidia has been the talk of the investing world for nearly two years. Its graphics processing units (GPUs) are used by those who want top-tier computing performance. These GPUs have been used almost exclusively by some of the world's largest artificial intelligence (AI) researchers, which has caused Nvidia's business to boom. Demand for its GPUs continues to pick up. In Q2 FY 2023 (ending July 31, 2022), Nvidia's revenue was $6.7 billion. In Q2 FY 2024 (ending July 30, 2023), it was $13.5 billion. Most recently, in Q2 FY 2025 (ending July 28), it was $30 billion. It's rare for a company to more than quadruple its revenue in just two years, let alone one doing it at Nvidia's size. However, its run is expected to continue, as management has guided for revenue of $32.5 billion in Q3. Clearly, the demand for Nvidia's GPU hasn't been satisfied, so buying the dip here looks smart, at least in the short term. Nvidia's earnings projections look attainable Looking forward through the next year, we can use Nvidia's forward price-to-earnings (P/E) ratio and compare that to its trailing P/E to understand what kind of growth Wall Street has already baked into the stock. NVDA PE Ratio data by YCharts At 56 times trailing earnings and 42 times forward earnings, Nvidia needs to achieve 33% earnings growth over the next year to achieve that valuation. If you look at Q2's earnings per share growth of 168%, you're probably inclined to think that will be an easy task. But there's more to that story. Nvidia's margins significantly expanded as demand for its GPUs rose. NVDA Gross Profit Margin (Quarterly) data by YCharts Starting in Q3, we will directly compare Nvidia's high profit margins against each other year over year, so Nvidia's profit growth will still be impressive, but not in the 100%-plus year-over-year range. As a result, its earnings growth will be more closely tied to revenue growth, but with 80% growth expected, it's still going to be very impressive. So with earnings growth of around 80% expected in Q3, I'd say Nvidia is also on track for the medium term. Long-term demand for GPUs will remain elevated Last comes the hardest part of the projection, the long term. If you believe that AI growth will continue, you're already expecting artificial intelligence to play a large role in our daily lives. The question is how much computing power it will require. Once the big AI developers build out enough computing power to process all the AI training they want, Nvidia's sales will likely suffer greatly. But when this will happen is anyone's guess. It could be decades away or right around the corner. With the beginning stages of AI deployment and training just occurring, I'd guess it will be some time before Nvidia struggles. With Nvidia checking all three boxes from a timing perspective, I think investors can confidently buy the dip in Nvidia's stock here.