The miracle of artificial intelligence Nvidia (Nasdaq: NVDA) The stock rose dramatically from $15 (adjusted for segmentation) when I first wrote about it To approximately $121 currently. It has overtaken Apple to become the second most valuable company in the world. I expected that too It is possible that NVDA will do a stock splitAnd it just happened. The stock continues to surprise with new highs (+144% YTD) after achieving amazing profits. However, my thesis remains sound: NVDA is attractive in the long term based on its undeniable leadership in AI and its enormous potential for AI growth.
NVDA announces huge profits time and time again
On May 22, Nvidia posted another impressive first-quarter results on May 22, driven by strong continuous compute and accelerating demand momentum for AI. Adjusted earnings are $6.12 per share It easily beat the consensus estimate of $5.60 per share. Also, the number came in much higher (+461%) than the fiscal Q1 2024 (ending April 2023) figure of $1.09 per share.
Impressively, first-quarter revenue jumped 262% year over year to $26.04 billion, beating consensus estimates of $24.59 billion. Furthermore, adjusted gross margin expanded 13.8 percentage points to an incredibly new high of 78.4% from 64.6% a year ago.
In conjunction with the earnings report, the company also announced a 10-for-1 stock split. While the stock split does not change the company’s valuation or performance, it does mean that NVDA will now be more available to retail investors, creating short-term momentum in the stock price. .
Moreover, the company increased its quarterly funds Dividend by 150% to $0.01 per share on a post-split basis. NVDA shares begin trading on an adjusted split basis today. Interestingly, this is the sixth split for Nvidia stock.
More importantly, NVDA’s crown jewel segment, data center revenue, rose 427% year over year to $22.6 billion. This sector represents 86% of the company’s total revenues. As expected, revenues in China declined due to export control restrictions in the United States. During the earnings call, management emphasized that “business in China is well below past levels.”
Looking ahead, Q2 guidance looks promising Revenues It is expected to hover around $28 billion, which exceeds expectations. However, adjusted gross margins are expected to be around 75.5% versus 77% expected for the first quarter three months ago. However, it is still far ahead of chipmakers such as Advanced Micro Devices (Nasdaq: AMD) and intel (NASDAQ:INTEC) with a gross profit margin of 50.6% and 41.5%, respectively, last year.
NVDA continues to innovate and maintains its leadership position in artificial intelligence
Nvidia continues to innovate in AI, keeping its leadership status quo intact by creating newer, cutting-edge AI products. NVDA’s latest GPUs and CPUs, powered by their hardware and software capabilities, remain the best in AI. As the preferred choice in high-compute data centers around the world, NVDA has superior pricing power.
The scope and expansion of AI continues to grow exponentially, and it is clear that demand continues to outpace supply. During the earnings call, Nvidia CEO Jensen Huang said: “Beyond cloud providers, generative AI has expanded to include consumer internet companies, enterprises, sovereign AI, automotive and healthcare customers, creating multiple multi-billion dollar vertical markets.”
In the Computex Conference Held in Taiwan on June 2, Huang revealed Nvidia’s latest AI architecture, Rubin, which is expected to start shipping in 2026. It follows the launch of the Blackwell platform less than three months ago in March. Blackwell, a designer of artificial intelligence and high-performance scientific computing, has built on the success of the Hopper platform, which was optimized for AI inference and training and launched less than a year ago.
Blackwell is now in full production and is expected to ramp up in the third quarter. Meanwhile, Hopper continues to see strong demand.
Furthermore, Huang said that NVDA will launch a new family of chips every year, compared to its initial plan of launching new models every two years. This accelerated pace of innovation and rapid transition to newer models and chip improvements has allowed Nvidia to retain a market share of 70% to 95% (according to Mizuho Securities estimates) in the AI chip market.
However, competition in the field of artificial intelligence is intensifying. Competitors love AMD (with Ryzen AI 300) And Intel Corporation Newer AI chips are launching at lower prices. Despite this, Nvidia’s leading edge in AI technology keeps AMD and Intel several quarters behind NVDA.
NVDA’s valuation remains inexpensive, given its earnings prowess
After Apple surpassed (Nasdaq: Apple) In terms of market capitalization, many investors are hesitant to buy NVDA stock amid its notable rise and concerns about its overvaluation.
But on the contrary, NVDA stock is not expensive. It currently trades at a forward price-earnings ratio of 44.7 times (based on FY2025 earnings forecasts). This is relatively cheaper than multiples of its peer group. For example, NVDA’s closest competitor, US-based AMD Semiconductor, is trading at a forward P/E of 47.8x, while Netherlands-based ASML Semiconductor (ASML) shares are trading at a forward P/E of 47.8x.Nasdaq: ASML) is trading at a forward EPS of 51x.
Interestingly, its current valuation still hovers around its five-year average of 46.6 times despite growing earnings, margins and share price several-fold. These are attractive price levels and potentially represent a reasonable buying opportunity, in my view, given the potential for breakthrough growth for giant Nvidia in the AI market.
Is NVDA stock a buy or sell option according to analysts?
Standing as an indomitable force, NVDA is a stock that is receiving widespread attention. With 37 Buys and three Hold ratings from analysts in the past three months, the consensus rating is an unequivocal Strong Buy. However, The average price target for Nvidia stock is $123.62 It indicates that stocks will return 2.2% over the next year.
Bottom line: Consider NVDA stock for its long-term AI potential
Nvidia has risen to become the world’s second most valuable stock, with a market cap of $2.98 trillion, a big jump from just under $100 billion less than five years ago. NVDA has earned its place by leading the AI industry to unprecedented levels.
Despite the increasing competition, NVDA still has a significant market share in the AI industry, which will continue to grow by leaps and bounds in the coming years. Therefore, I will continue to buy NVDA at current levels. While some pundits warn of a decline in demand after the initial wave of AI installations, I believe this is still at least several quarters away. Therefore, I will continue to buy NVDA at current levels.