Key takeaways
View moreNVIDIA appears slightly undervalued based on its exceptional financial performance, strong market position in AI and data centers, and significant growth prospects. While some valuation metrics suggest overvaluation, the company's extraordinary revenue growth, high profitability, and leadership in rapidly expanding markets justify premium multiples. The potential for continued AI-driven growth and successful new product launches outweigh the risks from export restrictions and increasing competition.
- NVIDIA's Q4 2025 revenue reached $39.331 billion, a 78% increase year-over-year, driven by strong performance in its data center segment, highlighting its dominance in AI infrastructure.
- The company's net profit margin was 56.17% in Q4 2025, significantly exceeding industry averages and demonstrating its ability to generate substantial profits from sales.
- NVIDIA's Return on Average Equity (ROE) was 119.18%, far surpassing the industry average, showcasing its efficient use of equity to generate profits.
- NVIDIA's total debt to total equity ratio was 12.95% as of January 31, 2025, significantly lower than the industry average of 62.80%, indicating a conservative capital structure.
- Free cash flow to equity was $15.552 billion in Q4 2025, with a free cash flow margin of 0.4, indicating a healthy level of cash generation relative to revenue.
- NVIDIA is actively expanding its global presence through strategic partnerships, including a recent collaboration with HUMAIN to enhance AI capabilities in Saudi Arabia, diversifying its revenue streams.
- NVIDIA's stock is currently trading at $129.93, with analysts predicting it could reach $150 by June 1, 2025, indicating a positive short-term outlook.
- The company faces potential headwinds from new export restrictions imposed by the Trump administration, which could complicate its operations in the Chinese market, potentially impacting its revenue and market share in a key region.
- NVIDIA has $43 billion in cash to support operations and potential tariff impacts, providing financial flexibility amid trade uncertainties.
- NVIDIA has demonstrated significant outperformance compared to the Technology Select Sector SPDR Fund (XLK) over the 1-year, 2-year, and 3-year periods, but has underperformed year-to-date, indicating potential short-term market fluctuations.
Evaluation summary
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Company Overview:
- NVIDIA Corp. designs and manufactures computer graphics processors, chipsets, and related multimedia software. Its two main segments are Graphics Processing Unit (GPU) and Compute & Networking. The Graphics segment includes GeForce GPUs for gaming and PCs, Quadro and NVIDIA RTX GPUs for enterprise workstation graphics, and automotive platforms for infotainment systems. The Compute & Networking segment consists of Data Center accelerated computing platforms, NVIDIA DRIVE automated-driving platform, and Jetson robotics.
- NVIDIA's products and services cater to cloud service providers, enterprises, startups, automotive OEMs, and consumer electronics companies. The company's revenue is significantly driven by its data center and gaming segments, with data center revenue more than doubling year-over-year in fiscal year 2025, reaching $115.2 billion.
- The benchmarks used for comparative analysis include the Technology Select Sector SPDR Fund (XLK). The peers used for comparative analysis are Advanced Micro Devices, Inc. (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM).
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Financial Performance:
- NVIDIA's revenue has shown a strong upward trend, with Q4 2025 revenue reaching $39.331 billion, a 12% increase sequentially and a 78% increase year-over-year. Fiscal year 2025 revenue was $130.5 billion, up 114% year-over-year.
- The company's gross profit margin was 73.03% in Q4 2025, slightly lower than the 78.35% in Q4 2024. The net profit margin was 56.17% in Q4 2025, compared to 57.14% in Q4 2024.
- NVIDIA exhibits exceptional profitability, with gross, operating, and net profit margins significantly exceeding industry averages. The net profit margin of 56.17% is exceptionally high, reflecting NVIDIA's ability to generate substantial profits from its sales.
- NVIDIA's Return on Average Assets (ROA) was 82.20%, Return on Average Total Equity (ROE) was 119.18%, and Return on Average Total Capital was 113.42% for the quarter ending January 31, 2025. These figures are significantly higher than the industry averages of -12.50%, -29.48%, and -13.59%, respectively.
- Recent news indicates that NVIDIA is projected to experience a 65% year-over-year revenue growth in Q1 2026, driven by sustained demand for its AI and data center solutions.
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Operational Efficiency:
- NVIDIA's total assets increased from $77.072 billion in April 2024 to $111.601 billion in January 2025. Total liabilities increased from $27.930 billion to $32.274 billion during the same period.
- The company's working capital increased from $38.506 billion in April 2024 to $62.079 billion in January 2025, indicating improved short-term financial health.
- NVIDIA's net operating cash flow was $16.629 billion in Q4 2025. Net investing cash flow was -$7.198 billion, and net financing cash flow was -$9.949 billion.
- Free cash flow to equity was $15.552 billion in Q4 2025, with a free cash flow margin of 0.4, indicating a healthy level of cash generation relative to revenue.
- Capital expenditure was $1.077 billion in Q4 2025, while depreciation, depletion, and amortization were $543 million.
- NVIDIA returned $8.1 billion to shareholders through share repurchases and cash dividends in Q4. Cash dividends paid were $245 million.
- NVIDIA's current ratio was 4.44, and its quick ratio was 3.88 as of January 31, 2025. These ratios are higher than the industry averages of 4.37 and 3.56, respectively, indicating a strong liquidity position.
- The company's total debt to total equity ratio was 12.95% as of January 31, 2025, significantly lower than the industry average of 62.80%, indicating a conservative capital structure.
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Growth Opportunities:
- NVIDIA is focused on scaling Blackwell production and expanding customer adoption. The company is transitioning to larger NVLink systems and expects networking to return to growth in Q1.
- NVIDIA is developing new AI agent platforms and expanding into robotics and physical AI. The company is collaborating with Cisco to integrate Spectrum X into their networking portfolio.
- NVIDIA is actively expanding its global presence through strategic partnerships, including a recent collaboration with HUMAIN to enhance AI capabilities in Saudi Arabia.
- The company's strategic focus areas include AI, data science, autonomous vehicles, robotics, and digital twin applications.
- NVIDIA is making progress on previously announced initiatives, such as the Blackwell architecture, a new data center GPU platform designed for generative AI and accelerated computing workloads.
- NVIDIA's capital allocation strategies are aligned with company goals, with investments in R&D, strategic acquisitions, and shareholder returns.
- Recent news indicates that NVIDIA will supply over 18,000 AI chips to HUMAIN for a new data center in Saudi Arabia, solidifying its position in the Middle East AI market.
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Recent Developments and Market Sentiment:
- NVIDIA's market capitalization has surged back above $3 trillion, reflecting a 50% increase from its April low, signaling strong investor confidence.
- The company faces potential headwinds from new export restrictions imposed by the Trump administration, which could complicate its operations in the Chinese market.
- NVIDIA is actively expanding its global presence through strategic partnerships, including a recent collaboration with HUMAIN to enhance AI capabilities in Saudi Arabia.
- Despite recent stock volatility, NVIDIA's stock has turned positive for the year, joining other major tech stocks in recovering from earlier losses.
- NVIDIA's stock is currently trading at $129.93, with analysts predicting it could reach $150 by June 1, 2025, indicating a positive short-term outlook.
- The overall market sentiment surrounding NVIDIA is cautiously optimistic, reflecting a blend of positive momentum and persistent challenges.
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Risks and Threats:
- Key risks identified in company-specific risk assessments include failure to accurately estimate customer demand and manage supply chain challenges, increasing competition and technological changes, regulatory and geopolitical risks, cybersecurity incidents, and reliance on a limited number of large customers and partners.
- Industry risks include increasing competition from companies developing their own AI chips, including major clients like Amazon and Google, which could erode NVIDIA's dominance in the AI accelerator market.
- Competitive threats include AMD, Intel, Huawei, Alibaba, Amazon, and Microsoft.
- Regulatory risks include export control restrictions, particularly from the U.S. government, which pose challenges and risks around NVIDIA's ability to serve certain markets like China. NVIDIA is defending a securities class action lawsuit related to statements about channel inventory and cryptocurrency mining impacts in 2017-2018.
- Recent news highlights concerns about potential double ordering and inventory write-offs, which could impact NVIDIA's July outlook, potentially affecting short-term stock performance.
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Valuation Analysis:
- NVIDIA's forward P/E ratio is approximately 26, significantly lower than some of its peers, suggesting potential undervaluation.
- Enterprise Value to EBITDA is 47.79, and Enterprise Value to Sales is 30.71, which are higher than the industry averages of 257.24 and 11.49, respectively.
- Potential catalysts include the successful ramp of Blackwell, continued growth in AI and data center sales, and strategic partnerships.
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Price Performance:
- NVIDIA's stock price has experienced volatility, with a recent surge back above $3 trillion in market capitalization.
- NVIDIA has demonstrated significant outperformance compared to the Technology Select Sector SPDR Fund (XLK) over the 1-year, 2-year, and 3-year periods. However, NVDA has underperformed XLK year-to-date.
- NVIDIA Corp. (NVDA) has generally outperformed Advanced Micro Devices, Inc. (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) over the 1-year, 2-year, and 3-year periods. However, in shorter time frames, such as Year-To-Date and 3 Months, NVDA has underperformed AMD.
- Recent news indicates that NVIDIA's stock is currently trading at $129.93, with analysts predicting it could reach $150 by June 1, 2025, indicating a positive short-term outlook.
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Future Outlook:
- Management expects Q1 2026 revenue to be $43 billion, plus or minus 2%, with sequential growth expected in both data center and gaming.
- GAAP and non-GAAP gross margins are projected to be 70.6% and 71%, respectively, plus or minus 50 basis points.
- Full-year fiscal year 2026 operating expenses are expected to grow in the mid-thirties.
- Analysts predict that NVIDIA's partnership with Saudi Arabia could lead to more significant AI-driven deals in the region, expanding its global influence.
- Recent news and developments are expected to influence the company's future performance positively, driven by sustained demand for its AI and data center solutions.
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Summary:
- NVIDIA exhibits exceptional financial health, characterized by strong revenue growth, high profitability, and a conservative capital structure. The company's strategic investments in data center infrastructure and R&D are expected to drive future growth in AI and accelerated computing.
- NVIDIA's strengths include its market leadership in AI, strong financial performance, and strategic partnerships. Weaknesses include potential headwinds from export restrictions and increasing competition. Opportunities include expanding into new markets and developing new AI agent platforms. Threats include regulatory risks, cybersecurity incidents, and reliance on a limited number of large customers and partners.
- NVIDIA's overall financial health is strong, with a conservative capital structure and ample liquidity. The company's financial stability is supported by its strong cash flow generation and efficient operations.
- Critical factors for future performance include the successful ramp of Blackwell, continued growth in AI and data center sales, and strategic partnerships.
- Areas requiring further monitoring include export control restrictions, increasing competition, and potential inventory write-offs.
- NVIDIA presents a compelling investment profile, characterized by strong growth potential, market leadership in AI, and a conservative capital structure. However, investors should be aware of the risks associated with export restrictions, increasing competition, and potential inventory write-offs. The company's valuation appears reasonable, with a forward P/E ratio of approximately 26. Overall, NVIDIA is well-positioned to capitalize on the growing demand for AI and accelerated computing solutions.
Price history
Fundamentals
Insights
- NVIDIA exhibits exceptional financial health, characterized by strong revenue growth, high profitability, and a conservative capital structure.
- The company's strategic investments in data center infrastructure and R&D are expected to drive future growth in AI and accelerated computing.
- NVIDIA faces challenges related to export control restrictions, increasing competition, and cybersecurity threats.
- Management's focus on scaling Blackwell production and expanding customer adoption is critical to sustaining NVIDIA's market leadership.
- The company's strong cash flow generation supports continued investments in organic growth, strategic acquisitions, and shareholder returns.
Analysis
- Revenue
- NVIDIA's revenue has demonstrated a strong upward trend, driven by robust demand for its products.
- The company's revenue growth is primarily fueled by its data center and gaming segments.
- Innovations and new product launches have been key factors in NVIDIA's revenue success.
- The YoY growth rate was greater than the 5-year CAGR for sales/revenue, suggesting growth acceleration.
- Profitability
- NVIDIA exhibits exceptional profitability, with gross, operating, and net profit margins significantly exceeding industry averages.
- The company's efficient operations and strong competitive advantage contribute to its high profitability.
- While gross and EBITDA margins have shown a slight decrease recently, net profit margins remain strong.
- The net profit margin of 56.17% is exceptionally high, reflecting NVIDIA's ability to generate substantial profits from its sales.
- Liquidity
- NVIDIA maintains a strong liquidity position, as indicated by its high current and quick ratios.
- The company possesses ample current assets to cover its short-term liabilities.
- The current ratio is slightly higher than the industry average, indicating a relatively strong liquidity position.
- The current ratio has been moderately increasing, indicating improving liquidity.
- Solvency
- NVIDIA's solvency is robust, characterized by a conservative capital structure and low debt levels.
- The company's debt-to-equity and debt/EBITDA ratios are significantly lower than industry averages.
- The total debt to total equity ratio is significantly lower than the industry average, indicating a conservative capital structure.
- The total debt to total equity ratio has been strongly decreasing, indicating decreasing financial leverage.
- Operational Efficiency
- NVIDIA demonstrates efficient asset utilization, as reflected by increasing sales and receivables.
- The company's capital expenditure efficiency is high, with past investments driving significant revenue and profit growth.
- Cash Flow / Total Debt is 715.4, which is significantly higher than the industry average.
- Cash Flow Analysis
- NVIDIA exhibits strong cash flow generation from its core operations, as evidenced by increasing net operating cash flow.
- The company's free cash flow supports long-term solvency, financial flexibility, and shareholder returns.
- Capital expenditure is primarily directed towards data center infrastructure and R&D, supporting future growth.
- The free cash flow margin of 0.4 indicates a healthy level of cash generation relative to revenue.
- Risk Factors
- Export control restrictions and regulatory scrutiny pose challenges to NVIDIA's ability to serve certain markets, particularly China.
- Increasing competition and technological changes in the industry could erode NVIDIA's market position.
- Cybersecurity incidents and data privacy/security compliance issues could damage NVIDIA's reputation.
- Reliance on a limited number of large customers and partners could make NVIDIA vulnerable to changes in their business.
- Future Outlook
- NVIDIA is expected to maintain strong revenue growth, driven by continued demand for its products in AI and accelerated computing.
- The company's profitability is projected to remain healthy, supported by cost management efforts and a focus on high-margin products.
- NVIDIA's financial flexibility will allow for further investments in R&D, strategic acquisitions, and shareholder returns.
- Management's focus on scaling Blackwell production and expanding customer adoption is expected to drive future growth.
- Profitability
Financial statements
Public filings
- NVIDIA is a leader in accelerated computing platforms, powering the growing demand for AI, data science, and other computationally intensive applications across industries.
- The company faces significant regulatory and geopolitical risks, particularly around export control restrictions that limit its ability to serve certain markets like China.
- Accurately forecasting demand and managing a complex global supply chain remain key operational challenges that could impact NVIDIA's financial performance.
- Competitive pressures, cybersecurity threats, and legal/compliance issues also pose material risks that the company must navigate.
- NVIDIA's financial results demonstrate its ability to capitalize on the surging demand for its data center and AI-focused products and services, though profitability is being pressured by inventory and supply chain costs.
- The company's substantial cash position and aggressive share repurchase program indicate confidence in its long-term growth prospects despite near-term headwinds.
Core Business and Operations:
- NVIDIA pioneered accelerated computing to help solve complex computational problems, expanding from its origins in PC graphics to create platforms for scientific computing, AI, data science, autonomous vehicles, robotics, and digital twin applications.
- The company operates in two main segments: Compute & Networking (data center accelerated computing, AI solutions, networking, automotive) and Graphics (gaming GPUs, professional visualization, cloud gaming, automotive infotainment).
- NVIDIA's customers include cloud service providers, enterprises, startups, automotive OEMs, and consumer electronics companies that leverage its computing platforms and software.
- Key competitors include AMD, Intel, Huawei, Alibaba, Amazon, Microsoft, and others offering hardware, software, and cloud solutions for accelerated computing.
Industry and Market Trends:
- The demand for accelerated computing, AI, and generative AI models is driving strong growth in NVIDIA's data center business, as customers scale their AI infrastructure.
- Regulatory scrutiny and export control restrictions, particularly from the U.S. government, pose challenges and risks around NVIDIA's ability to serve certain markets like China.
- Macroeconomic factors like inflation, interest rates, supply chain constraints, and geopolitical tensions could impact NVIDIA's costs, demand, and financial performance.
- Sustainability and responsible use of AI technologies are emerging as important considerations for NVIDIA and its customers.
Recent Events:
- Launched the Blackwell architecture, a new data center GPU platform designed for generative AI and accelerated computing workloads.
- Continued to expand its data center product portfolio and cloud services offerings to meet growing AI demand.
- Faced ongoing export control restrictions from the U.S. government, impacting its ability to serve certain markets.
- Announced a 10-for-1 stock split to make shares more accessible to investors.
Risk Factors:
- Failure to accurately estimate customer demand and manage supply chain challenges could lead to inventory imbalances and financial impacts.
- Increasing competition and technological changes in the industry could erode NVIDIA's market position and financial performance.
- Regulatory and geopolitical risks, including export control restrictions, could limit NVIDIA's ability to serve certain markets and customers.
- Cybersecurity incidents and data privacy/security compliance issues could damage NVIDIA's reputation and result in legal/financial liabilities.
- Reliance on a limited number of large customers and partners could make NVIDIA vulnerable to changes in their business.
Legal Matters:
- NVIDIA is defending a securities class action lawsuit related to statements about channel inventory and cryptocurrency mining impacts in 2017-2018.
- Several derivative lawsuits have been filed, also related to the same channel inventory and cryptocurrency mining issues, which remain stayed pending resolution of the securities class action.
Management's Discussion and Analysis:
- NVIDIA's revenue growth was driven by strong demand for its data center computing and networking platforms, particularly for AI and accelerated computing workloads.
- Gross margins improved due to the higher mix of data center revenue, though inventory provisions and excess purchase commitments continued to negatively impact profitability.
- Operating expenses grew significantly, driven by increased compensation, infrastructure, and engineering costs to support new product development.
- The company maintained a strong cash position and continued its substantial share repurchase program to offset dilution from employee stock awards.
Earnings calls
Earnings Report 2025Q4 (2025-02-26)
Key takeaways
- Blackwell is a Key Growth Driver: The successful ramp of Blackwell is critical to NVIDIA's continued growth and market leadership in AI.
- Inference is a Major Opportunity: The accelerating demand for inference, particularly for reasoning AI models, presents a significant growth opportunity for NVIDIA.
- Gross Margin Improvement is Expected: While gross margins are temporarily impacted by the Blackwell ramp, management expects them to improve later in the fiscal year.
- AI is Transforming Industries: AI is rapidly being integrated into various industries and applications, driving demand for NVIDIA's accelerated computing solutions.
- Strategic Initiatives are Expanding the Market: NVIDIA's strategic initiatives, such as expanding into robotics and physical AI, are opening up new markets and growth opportunities.
- China Remains a Competitive Market: Despite export controls, China remains an important market for NVIDIA, although competition is intense.
- Long-Term Growth Potential is Significant: Management believes that AI has the potential to address a larger part of the world's GDP than any previous technology, indicating significant long-term growth potential for NVIDIA.
Focus of management’s prepared remarks
- Record Financial Performance: NVIDIA reported record Q4 revenue of $39.3 billion, up 12% sequentially and 78% year-over-year, and fiscal year 2025 revenue of $130.5 billion, up 114% year-over-year.
- Data Center Growth: Data center revenue was a significant driver, with fiscal 2025 revenue reaching $115.2 billion, more than doubling from the prior year. Q4 data center revenue was $35.6 billion, up 16% sequentially and 93% year-over-year.
- Blackwell Ramp: The Blackwell ramp commenced in Q4, with sales exceeding expectations at $11 billion. Production is in full gear across multiple configurations, and supply is increasing rapidly.
- Inference Demand: Inference demand is accelerating, driven by test time scaling and new reasoning models. Blackwell was architected for reasoning AI inference, offering significant performance and cost advantages over Hopper 100.
- Customer Adoption: Large CSPs represented about half of data center revenue in Q4, with sales increasing nearly 2x year-over-year. Regional cloud hosting of NVIDIA GPUs increased as a percentage of data center revenue.
- Enterprise Growth: Enterprise revenue increased nearly 2x year-over-year, driven by demand for model fine-tuning, agentic AI workflows, and GPU-accelerated data processing.
- Automotive Growth: Automotive revenue was a record $570 million, up 27% sequentially and 103% year-over-year, driven by the continued ramp in autonomous vehicles.
- Gross Margin Outlook: Gross margins are expected to be in the low seventies during the Blackwell ramp, with a return to the mid-seventies later in the fiscal year.
- Q1 2026 Guidance: Total revenue is expected to be $43 billion, plus or minus 2%, with sequential growth expected in both data center and gaming.
- Strategic Partnerships: Cisco announced integrating Spectrum X into their networking portfolio to help enterprises build AI infrastructure.
Focus of the analyst Q&A
- Gross Margin Trajectory:
- Concerns about the pace of gross margin improvement in the second half of the year to reach the mid-seventies target.
- Impact of tariffs on gross margins and the broader semiconductor industry.
- Blackwell Ultra Demand and Ramp:
- Understanding the demand dynamics for Blackwell Ultra given the ongoing ramp of the current generation Blackwell solutions.
- How customers and the supply chain will manage the simultaneous ramps of the two products.
- Sustained Demand and Future Growth:
- Factors providing confidence in the sustainability of strong demand into the next year.
- Impact of innovations like DeepSeq on the demand outlook.
- Custom ASICs vs. Merchant GPUs:
- The balance between custom ASICs and merchant GPUs in the market.
- Whether customers are planning to build heterogeneous super clusters using both GPUs and ASICs.
- Geographic Revenue Mix:
- Concerns about the concentration of revenue growth in the US and its implications for overall growth.
- The outlook for revenue in China given export controls.
- Replacement Cycles:
- How to think about the infrastructure that's been deployed from a replacement cycle perspective.
- When we might start to see some refresh opportunity.
- Enterprise vs. Hyperscaler Consumption:
- How hyperscaler expenses split between external (cloud services) and internal workloads.
- Whether enterprises will become a larger part of the consumption mix.
- Inference-Dedicated Clusters:
- The potential future of inference-dedicated clusters given the increasing blurring of lines between training and inference.
- The overall impact to NVIDIA and its customers.
Summary
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Financial Performance
NVIDIA reported a record Q4 with revenue of $39.3 billion, up 12% sequentially and 78% year-over-year, exceeding their outlook of $37.5 billion. Fiscal year 2025 revenue reached $130.5 billion, a 114% increase from the prior year. Data center revenue for fiscal 2025 was $115.2 billion, more than doubling year-over-year. Q1 2026 revenue is projected to be $43 billion, plus or minus 2%. GAAP gross margins were 73%, and non-GAAP gross margins were 73.5%.
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Revenue Drivers
Data center revenue was a primary driver, fueled by the Blackwell ramp and continued growth from Hopper 200. Blackwell sales exceeded expectations, reaching $11 billion in Q4. Data center compute revenue jumped 18% sequentially and over 2x year-over-year. Gaming revenue decreased 22% sequentially and 11% year-over-year due to supply constraints, but strong sequential growth is expected in Q1. Automotive revenue was a record $570 million, up 27% sequentially and 103% year-over-year.
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Profit Margins and Cost Management
GAAP gross margins were 73%, and non-GAAP gross margins were 73.5%, down sequentially due to initial Blackwell deliveries. Gross margins are expected to be in the low seventies during the Blackwell ramp, with a return to the mid-seventies later in the fiscal year. GAAP operating expenses were up 9%, and non-GAAP operating expenses were up 11%, reflecting higher engineering development and compute/infrastructure costs. Full-year fiscal year 2026 operating expenses are expected to grow in the mid-thirties.
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Guidance and Outlook
Q1 2026 revenue is expected to be $43 billion, plus or minus 2%. Sequential growth is expected in both data center and gaming. GAAP and non-GAAP gross margins are projected to be 70.6% and 71%, respectively, plus or minus 50 basis points. Full-year fiscal year 2026 operating expenses are expected to grow in the mid-thirties. Management expressed confidence in sustained demand, driven by AI's integration into various applications and the emergence of new AI paradigms.
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Strategic Initiatives
NVIDIA is focused on scaling Blackwell production and expanding customer adoption. The company is transitioning to larger NVLink systems and expects networking to return to growth in Q1. They are also developing new AI agent platforms and expanding into robotics and physical AI. NVIDIA is collaborating with Cisco to integrate Spectrum X into their networking portfolio. The company returned $8.1 billion to shareholders through share repurchases and cash dividends in Q4.
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Management Commentary
Management highlighted the unprecedented speed and scale of the Blackwell ramp. They emphasized the importance of NVIDIA's full-stack inference platform in boosting performance and reducing costs for customers. The company is driven to reduce inference costs and deliver the lowest TCO and highest ROI. Management believes AI has gone mainstream and is being integrated into every application. They see significant growth opportunities in agentic AI for enterprise, physical AI for robotics, and Sovereign AI.
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Industry and Market Conditions
The data center market is experiencing strong growth, driven by the build-out of AI factories globally. Demand for compute infrastructure is surging, with countries investing heavily in AI ecosystems. The market in China for data center solutions remains very competitive. AI is evolving beyond perception and generative AI into reasoning, driving demand for AI computing.
News evaluation
Sentiment rating:Mixed
May 14, 2025Summary
The overall sentiment surrounding NVIDIA Corp. (NVDA) is cautiously optimistic, reflecting a blend of positive momentum and persistent challenges. The company has demonstrated resilience, with its market capitalization surging back above $3 trillion, signaling renewed investor confidence. Strategic partnerships, particularly in Saudi Arabia, are expected to enhance its global presence and offset potential revenue losses from export restrictions to China. However, concerns about inventory management, competition, and geopolitical tensions remain, necessitating a vigilant approach from investors. Despite these challenges, analysts generally maintain a favorable outlook on NVIDIA.
Key takeways
Nvidia's market capitalization has surged back above $3 trillion, reflecting renewed investor confidence and positive market sentiment.
The company is strategically expanding its global presence through partnerships, particularly in Saudi Arabia, to capitalize on growing demand for AI infrastructure.
Analysts maintain a cautiously optimistic outlook on Nvidia, citing its strong fundamentals, market leadership in AI, and potential for long-term growth despite short-term challenges.
News
Nvidia's market capitalization has surged back above $3 trillion as of today, reflecting a 50% increase from its April low, signaling strong investor confidence.
Nvidia is projected to experience a 65% year-over-year revenue growth in Q1 2026, driven by sustained demand for its AI and data center solutions.
The company faces potential headwinds from new export restrictions imposed by the Trump administration, which could complicate its operations in the Chinese market.
Nvidia is actively expanding its global presence through strategic partnerships, including a recent collaboration with HUMAIN to enhance AI capabilities in Saudi Arabia.
Despite recent stock volatility, Nvidia's stock has turned positive for the year, joining other major tech stocks in recovering from earlier losses.
Nvidia's stock is currently trading at $129.93, with analysts predicting it could reach $150 by June 1, 2025, indicating a positive short-term outlook.
Nvidia will supply over 18,000 AI chips to HUMAIN for a new data center in Saudi Arabia, solidifying its position in the Middle East AI market.
Nvidia's Q4 FY2025 sales reached $39.3 billion, marking a 78% increase year-over-year, driven by strong performance in its data center segment.
Nvidia's forward P/E ratio is approximately 26, significantly lower than some of its peers, suggesting potential undervaluation.
Nvidia has $43 billion in cash to support operations and potential tariff impacts, providing financial flexibility amid trade uncertainties.
Analysis
Analysts predict that Nvidia's partnership with Saudi Arabia could lead to more significant AI-driven deals in the region, expanding its global influence.
Concerns about double ordering and inventory write-offs could impact Nvidia's July outlook, potentially affecting short-term stock performance.
Analysts express confidence in Nvidia's growth trajectory, particularly in AI and data center sales, driven by increasing demand for AI infrastructure.
The easing of trade tensions has led to increased investor interest in high-growth tech stocks, including Nvidia, boosting market sentiment.
Analysts believe that Nvidia's sales to Saudi Arabia could mitigate revenue losses from restrictions on sales to China, diversifying its revenue streams.
Market sentiment has improved with expectations of simpler export rules, which could positively impact Nvidia's stock and long-term growth.
Cathie Wood views Nvidia as a bargain opportunity, indicating potential for recovery despite recent declines, suggesting confidence in its long-term prospects.
Wall Street analysts have made only minor downward revisions to Nvidia's growth forecasts, suggesting continued confidence in the company's future performance.
Analysts suggest Nvidia remains a strong investment due to its market dominance and ongoing innovation in AI chips, positioning it well for future growth.
Analysts believe that Huawei's advancements are significant but face challenges in competing with Nvidia, reinforcing Nvidia's technological superiority.
Trends
Nvidia's revenue growth is increasingly tied to AI spending, with a significant portion of its revenue derived from the data center segment, highlighting its strategic focus on AI infrastructure.
The company is actively shifting its manufacturing and supply chain strategies to mitigate geopolitical risks, including investing in U.S. manufacturing and diversifying its customer base.
Analysts are closely monitoring Nvidia's ability to navigate trade tensions and maintain its competitive edge in the AI chip market, particularly in the face of increasing competition from both established players and emerging rivals.
Risk factors
New export restrictions from the Trump administration could complicate Nvidia's operations in China, potentially impacting its revenue and market share in a key region.
Concerns about potential double ordering and inventory write-offs could impact Nvidia's July outlook, potentially affecting short-term stock performance and investor confidence.
Increasing competition from companies developing their own AI chips, including major clients like Amazon and Google, could erode Nvidia's dominance in the AI accelerator market.
Comparative analysis
Benchmarks (as of 2025-05-14)
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Performance Comparison:
- NVIDIA Corp. (NVDA) has demonstrated significant outperformance compared to the Technology Select Sector SPDR Fund (XLK) over the 1-year, 2-year, and 3-year periods. Specifically, NVDA's returns were 43.48%, 363.59%, and 685.19% compared to XLK's 11.06%, 55.99%, and 78.3%, respectively. However, NVDA has underperformed XLK year-to-date, with returns of -2.14% versus 1.11% for XLK. In the short term, NVDA has shown strong overperformance in the last week and month, with returns of 16.02% and 29.52% respectively, compared to XLK's 7.6% and 20.74%.
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Risk and Return Analysis:
- NVIDIA Corp. (NVDA) has provided higher annualized returns compared to the Technology Select Sector SPDR Fund (XLK) over the 1-year, 2-year, and 3-year periods. NVDA's annualized returns were 43.48%, 115.31%, and 98.76% compared to XLK's 11.06%, 24.9%, and 21.26%, respectively. However, NVDA has exhibited higher annualized volatility compared to XLK. For example, in Q1 2024, NVDA's volatility ranged from 27.72% to 65.7%, while XLK's volatility ranged from 13.15% to 20.81%. NVDA's maximum drawdown was -66.34% on 10/14/2022, while XLK's maximum drawdown was -33.56% on 10/12/2022, indicating a higher risk profile for NVDA.
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Risk-Adjusted Performance:
- NVIDIA Corp. (NVDA) generally exhibited higher Sharpe Ratios than the Technology Select Sector SPDR Fund (XLK), indicating better risk-adjusted returns. However, there were periods where NVDA's Sharpe Ratio was lower, particularly during times of high volatility and significant drawdowns. NVDA has a higher Beta than XLK, indicating that it is more sensitive to market movements. For example, in Q1 2024, NVDA's Beta ranged from 1.92 to 2.15, while XLK's Beta ranged from 1.23 to 1.32.
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Overall Assessment:
- NVIDIA Corp. (NVDA) has demonstrated strong historical performance and higher annualized returns compared to the Technology Select Sector SPDR Fund (XLK). However, NVDA also exhibits higher volatility, larger drawdowns, and a higher Beta, indicating a higher risk profile. While NVDA generally offers better risk-adjusted returns as indicated by its Sharpe Ratio, its performance is more volatile and sensitive to market movements. Investors should consider their risk tolerance and investment horizon when evaluating NVDA compared to XLK. The recent underperformance year-to-date, coupled with high recent volatility, suggests that NVDA may be subject to short-term market fluctuations.
Peers Price History(as of 2025-05-14)
- Performance Comparison:
- NVIDIA Corp. (NVDA) has generally outperformed Advanced Micro Devices, Inc. (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) over the 1-year, 2-year, and 3-year periods. For example, over the past year, NVDA's return was 43.48%, compared to -27.61% for AMD and 29.34% for TSM. However, in shorter time frames, such as Year-To-Date and 3 Months, NVDA has underperformed AMD. In the most recent week and month, NVDA has outperformed TSM, but underperformed AMD for the month. This suggests that while NVDA has strong long-term performance, its short-term performance can be more variable compared to its peers.
- Risk and Return Analysis:
- NVIDIA Corp. (NVDA) has provided higher annualized returns compared to Advanced Micro Devices, Inc. (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) over the 1-year, 2-year, and 3-year periods. For example, the 3-year annualized return for NVDA is 98.76%, compared to 7.7% for AMD and 30.97% for TSM.
- NVIDIA Corp. (NVDA) has generally exhibited higher annualized volatility compared to Taiwan Semiconductor Manufacturing Co., Ltd. (TSM), but similar volatility to Advanced Micro Devices, Inc. (AMD). This indicates that NVDA's higher returns have come with a higher degree of risk compared to TSM.
- NVIDIA Corp. (NVDA) experienced a maximum drawdown of -66.34% on 10/14/2022, which is similar to AMD's maximum drawdown of -65.45% on the same date, but greater than TSM's maximum drawdown of -56.62% on 11/03/2022. This suggests that NVDA and AMD have similar risk profiles, while TSM is less risky in terms of potential losses from previous peaks.
- Risk-Adjusted Performance:
- NVIDIA Corp. (NVDA) has generally offered a better risk-adjusted return, as indicated by its higher Sharpe Ratio, compared to Advanced Micro Devices, Inc. (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) for much of the period analyzed. However, in Q4 2024, AMD's Sharpe Ratio was higher than NVDA's.
- NVIDIA Corp. (NVDA) has a beta value consistently above 1, indicating that it is more sensitive to market movements compared to the overall market. The beta values for NVDA and AMD are similar, while TSM has a lower beta value, indicating that it is less sensitive to market movements compared to NVDA and AMD.
- Overall Assessment:
- NVIDIA Corp. (NVDA) has demonstrated strong long-term performance with high annualized returns, but also exhibits higher volatility and drawdown compared to Taiwan Semiconductor Manufacturing Co., Ltd. (TSM). While NVDA generally offers better risk-adjusted returns compared to AMD and TSM, its short-term performance can be more variable. The higher beta value indicates that NVDA is more sensitive to market movements, which can result in greater gains during market upturns, but also greater losses during market downturns.
- A significant trend is the recent underperformance of NVDA compared to AMD in the short term (Year-To-Date and 3 Months), despite NVDA's strong long-term performance. This could be due to various factors, such as changing market conditions, company-specific news, or shifts in investor sentiment.
Peers Fundamentals(as of 2025-01-31)
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Market Position and Size:
- NVDA's market capitalization is significantly larger than its peers, AMD and TSM, by $3,109,746.57 million and $2,290,613.8 million, respectively.
- NVDA's revenue, EBITDA, and net income are also substantially higher than its peers, indicating a dominant market position.
- The company's size and financial metrics suggest it is a market leader in the semiconductor industry.
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Profitability and Efficiency:
- NVDA's gross profit margin of 74.99% is significantly higher than AMD's 45.15% and TSM's 56.02%, as well as the industry average of -40.07%.
- NVDA's EBITDA margin of 63.85% is lower than TSM's 68.81% but significantly higher than AMD's 21.54% and the industry average of -1950.36%.
- NVDA's net profit margin of 55.85% is significantly higher than AMD's 8.03%, TSM's 41.68%, and the industry average of -1877.28%.
- NVDA's return on average assets, equity, and capital are all significantly higher than its peers and the industry average, indicating superior efficiency in generating returns.
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Financial Health and Stability:
- NVDA's current ratio of 4.44 is higher than AMD's 2.8 and TSM's 2.39, and slightly above the industry average of 4.36, indicating strong liquidity.
- NVDA's quick ratio of 3.88 is also higher than AMD's 1.97 and TSM's 2.18, and above the industry average of 3.57, suggesting a robust ability to meet short-term obligations.
- NVDA's total debt to total equity ratio of 12.95% is lower than TSM's 23.69% and the industry average of 64.11%, but higher than AMD's 8.17%.
- NVDA's debt/EBITDA ratio of 0.1 is lower than AMD's 0.7, TSM's 0.49, and the industry average of 12.97, indicating a low debt burden relative to its earnings.
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Valuation and Market Perception:
- NVDA's enterprise value to sales ratio of 26.75 is significantly higher than AMD's 5.95, TSM's 8.41, and the industry average of 12.19, suggesting a premium valuation.
- NVDA's enterprise value to EBITDA ratio of 41.87 is higher than TSM's 12.22 but lower than AMD's 27.55 and the industry average of 232.96.
- NVDA's price-to-earnings ratio of 46.06 is lower than AMD's 86.29 but higher than TSM's 25.06 and lower than the industry average of 67.67.
- NVDA's price-to-book ratio of 41.76 is significantly higher than AMD's 3.29, TSM's 7.29, and the industry average of 6.05.
- NVDA's price-to-sales ratio of 25.72 is significantly higher than AMD's 6.9, TSM's 10.44, and the industry average of 14.28.
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Cash Flow and Capital Management:
- NVDA's net operating cash flow of $64,089 million is comparable to TSM's $64,042.2 million and significantly higher than AMD's $3,459 million.
- NVDA's total capital expenditure of $3,236 million is significantly lower than TSM's $33,278.11 million but higher than AMD's $706 million.
- NVDA's free cash flow of $60,853 million is significantly higher than AMD's $2,753 million and TSM's $30,764.11 million.
- NVDA's cash conversion ratio of 1.33 is greater than AMD's 0.76 and TSM's 0.56, but less than the industry average of 1.69.
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Growth and Future Prospects:
- NVDA's year-over-year growth in sales/revenue, EBITDA, net income, and basic earnings per share has generally outperformed its peers.
- NVDA's 3-year and 5-year CAGR figures are also generally higher than the peer group average, indicating strong long-term growth trends.
- NVDA's growth rates have been highly variable over the past 5 years, with significant fluctuations in metrics like net income and free cash flow.
- NVDA's most recent year-over-year growth rates are generally higher than its 5-year CAGRs, indicating an acceleration of growth.
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Potential for Investment:
- NVDA presents an attractive investment opportunity due to its strong growth potential, high profitability, efficient returns, and solid financial stability.
- However, its premium valuation and potential inefficiencies in converting revenue to cash flow warrant careful consideration.
- NVDA's dominant market position and strong financial performance make it a compelling investment option in the semiconductor industry.
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Key Risks and Considerations:
- NVDA's premium valuation may not be sustainable if its growth rates slow down or its profitability declines.
- NVDA's reliance on specific markets and customers could expose it to risks if those markets or customers experience a downturn.
- NVDA's exposure to intense competition in the semiconductor industry could erode its market share and profitability.
- NVDA's exposure to global economic and political risks could disrupt its supply chain and demand for its products.
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Overall Assessment:
- NVDA exhibits strong financial health, characterized by high profitability, efficient returns, robust liquidity, and manageable leverage.
- Its superior performance in key financial metrics positions it favorably within its peer group and the broader industry.
- NVDA's dominant market position and strong financial performance make it a compelling investment option in the semiconductor industry, but its premium valuation and potential risks warrant careful consideration.