Key takeaways
View moreNVIDIA's forward P/E under 25x and PEG ratio of 0.5 suggest undervaluation given its dominant market position and exceptional growth prospects in AI infrastructure. While significant risks exist from export controls and competition, the company's strong financial performance, 90%+ GPU market share, and exposure to the $1.5T sovereign AI market opportunity provide substantial upside potential that isn't fully reflected in current valuation metrics.
- NVIDIA's Q1 2026 revenue reached $44.06 billion, a 69% year-over-year increase, driven by strong demand in the data center and gaming segments, highlighting its market leadership in accelerated computing.
- The $4.5 billion charge related to U.S. export controls on H20 chips significantly impacted gross margins, reducing them to 60.52%, underscoring the geopolitical risks facing the company.
- NVIDIA's data center revenue surged 73% year-over-year to $39.1 billion, fueled by the increasing demand for AI inference workloads and the Blackwell architecture, demonstrating its pivotal role in the AI revolution.
- The company's strategic partnership with HUMAIN in Saudi Arabia could potentially generate $15 billion to $20 billion in revenue, showcasing its expansion into new markets and diversification of revenue streams.
- Despite strong financial performance, NVIDIA faces increasing competition and regulatory risks, particularly concerning AI technologies and export controls, which could impact its future growth and profitability.
- NVIDIA's stock has consistently outperformed the Technology Select Sector SPDR Fund (XLK), delivering a total return of 656.65% over the past three years compared to XLK's 73.45%, reflecting its superior growth potential but also higher volatility.
- Management expects Q2 revenue to be $45 billion, plus or minus 2%, with GAAP gross margins of 71.8%, indicating continued growth and profitability despite challenges in the China market.
- Analysts estimate the total addressable global sovereign AI market could be $1.5 trillion, which could significantly benefit NVIDIA, positioning it as a key player in the emerging sovereign AI landscape.
- NVIDIA's forward P/E ratio is under 25 and PEG ratio is 0.5, suggesting potential undervaluation, making it an attractive investment opportunity given its growth prospects in the AI sector.
- The company's commitment to innovation and strategic partnerships, combined with strong demand for its products, positions it favorably for long-term growth, but investors should closely monitor geopolitical risks and competitive pressures.
Evaluation summary
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Company Overview:
- NVIDIA Corp. (NVDA) designs and manufactures computer graphics processors, chipsets, and related multimedia software. The company operates through two segments: Graphics Processing Unit (GPU) and Compute & Networking.
- The GPU segment includes GeForce GPUs for gaming and PCs, GeForce NOW game streaming, Quadro and NVIDIA RTX GPUs for enterprise workstation graphics, vGPU software for cloud-based visual computing, automotive platforms for infotainment systems, and Omniverse Enterprise software.
- The Compute & Networking segment includes Data Center accelerated computing platforms, networking platforms (Quantum for InfiniBand and Spectrum for Ethernet), NVIDIA DRIVE automated-driving platform, Jetson robotics, NVIDIA AI Enterprise software, and DGX Cloud software and services.
- NVIDIA's benchmarks include the Technology Select Sector SPDR Fund (XLK), and its peers include Advanced Micro Devices, Inc. (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM).
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Financial Performance:
- NVIDIA's revenue has shown consistent growth, with the most recent quarter (2025-04-30) reaching $44.06 billion, up from $30.04 billion in the quarter ending 2024-07-31. This represents a 46.67% increase over three quarters.
- Net income for the quarter ending 2025-04-30 was $18.78 billion, compared to $16.60 billion for the quarter ending 2024-07-31, an increase of 13.13%.
- Gross profit margin for the quarter ending 2025-04-30 was 60.52%, a decrease from 75.15% in the quarter ending 2024-07-31. This decrease is attributed to a $4.5 billion charge related to U.S. export restrictions on its H20 chips, as noted in the news evaluation and earnings call. Excluding this charge, the gross margin would have been 71.3%.
- Net profit margin for the quarter ending 2025-04-30 was 42.61%, down from 55.26% in the quarter ending 2024-07-31.
- Return on Average Assets for the quarter ending 2025-04-30 was 75.89%, compared to an industry average of -12.76%. Return on Average Total Equity was 115.46%, compared to an industry average of -39.71%. Return on Average Total Capital was 111.56%, compared to an industry average of -15.00%. These figures indicate NVIDIA's superior profitability compared to its industry peers.
- Recent news indicates that NVIDIA's data center revenue reached $39.1 billion in Q1 FY 2026, a 73% increase year-over-year, driven by the increasing demand for AI inference workloads.
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Operational Efficiency:
- Total current assets increased from $59.63 billion in the quarter ending 2024-07-31 to $89.94 billion in the quarter ending 2025-04-30, indicating improved liquidity.
- Total current liabilities increased from $13.97 billion in the quarter ending 2024-07-31 to $26.54 billion in the quarter ending 2025-04-30.
- Working capital increased from $45.66 billion in the quarter ending 2024-07-31 to $63.39 billion in the quarter ending 2025-04-30.
- Net operating cash flow increased significantly from $14.49 billion in the quarter ending 2024-07-31 to $27.41 billion in the quarter ending 2025-04-30.
- Free cash flow to equity increased from $13.51 billion in the quarter ending 2024-07-31 to $26.19 billion in the quarter ending 2025-04-30, demonstrating strong cash generation capabilities.
- Total capital expenditure increased from $977 million in the quarter ending 2024-07-31 to $1.23 billion in the quarter ending 2025-04-30, reflecting increased investments in growth initiatives. Depreciation, Depletion & Amortization increased from $433 million to $611 million over the same period.
- The company returned $244 million in cash dividends in the most recent quarter. Share repurchases are also a significant component of capital return, although specific figures for the most recent quarter are not detailed in the cash flow statement.
- The current ratio decreased from 4.27 in the quarter ending 2024-07-31 to 3.39 in the quarter ending 2025-04-30, while the quick ratio decreased from 3.79 to 2.96 over the same period. These decreases suggest a slight weakening in short-term liquidity.
- The debt-to-equity ratio decreased from 17.22% in the quarter ending 2024-07-31 to 12.27% in the quarter ending 2025-04-30, indicating a lower reliance on debt financing.
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Growth Opportunities:
- NVIDIA is focused on expanding its presence in the data center market, driven by the increasing demand for AI inference workloads. The Blackwell architecture is designed to meet this demand, as highlighted in the earnings call and news evaluation.
- The company is investing heavily in R&D to develop new products and technologies, including the Isaac GR00T platform for humanoid robot development. R&D spending is reflected in the increasing operating expenses, as noted in the SEC filings.
- NVIDIA is pursuing geographic expansion, particularly in the Middle East, as evidenced by the strategic partnership with HUMAIN in Saudi Arabia. This partnership could potentially generate $15 billion to $20 billion in revenue, according to news reports.
- Strategic focus areas include AI factory deployments, agentic AI platforms, and partnerships for AI-powered cybersecurity, as mentioned in the earnings call summary.
- The company is also focusing on onshore manufacturing, with TSMC building fabs in Arizona and partnerships with Foxconn and Wistron to construct AI supercomputer factories in the US.
- Recent news highlights NVIDIA's plans to release a cheaper Blackwell AI chip for the Chinese market, reflecting a strategy to navigate geopolitical challenges.
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Recent Developments and Market Sentiment:
- The overall sentiment regarding NVIDIA Corp. is positive, driven by its dominant position in the AI infrastructure market and strong revenue growth.
- NVIDIA holds over 90% market share in the GPU space as of Q1 2025 and reported a 69% year-over-year revenue increase in Q1 2025.
- The company incurred a $4.5 billion charge due to U.S. export controls affecting its H20 chips, impacting its gross margins.
- NVIDIA's market cap has surged back above $3 trillion, reflecting a 50% increase from its April low.
- Analysts believe NVIDIA's commitment to innovation will keep it ahead of competitors, and its growth is projected to continue despite challenges from custom chip designs.
- Oppenheimer estimates the total addressable global sovereign AI market could be $1.5 trillion, which could significantly benefit NVIDIA.
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Risks and Threats:
- Key risks include the impact of U.S. export restrictions on sales to China, which could result in a loss of approximately $8 billion in H20 revenue for Q2, as mentioned in the earnings call.
- Increasing competition from companies developing their own AI solutions could impact NVIDIA's market share, as noted in the news evaluation.
- Potential market corrections and increasing competition from Chinese rivals could affect NVIDIA's stock, as highlighted in the news evaluation.
- The reliance on a few major customers, including Amazon, could pose risks to NVIDIA's market position.
- Regulatory risks around the responsible development and use of AI technologies are increasing, as noted in the SEC filings.
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Valuation Analysis:
- Enterprise Value to EBITDA for the quarter ending 2025-04-30 is 30.45, lower than the industry average of 232.96. Enterprise Value to Sales is 18.10, higher than the industry average of 12.19.
- NVIDIA's forward P/E ratio is under 25 and PEG ratio is 0.5, indicating potential undervaluation, according to news reports.
- Potential catalysts include strong performance in Q3 and Q4, supported by expanding AI adoption and new product launches, as mentioned in the news evaluation.
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Price Performance:
- NVIDIA's stock price has shown significant volatility, with a recent upward trend. The price increased from $102.70 on 2025-04-23 to $143.85 on 2025-06-20.
- NVIDIA has consistently outperformed the Technology Select Sector SPDR Fund (XLK) across various time horizons. For example, over the past three years, NVDA has delivered a total return of 656.65% compared to XLK's 73.45%.
- The stock has risen 5% since April 15, 2025, as reported in the news.
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Future Outlook:
- Management expects Q2 revenue to be $45 billion, plus or minus 2%, with modest sequential growth across all platforms, as stated in the earnings call.
- GAAP and non-GAAP gross margins are expected to be 71.8% and 72%, respectively, in Q2.
- Analysts predict NVIDIA will continue to grow as AI infrastructure demand rises, with some estimating full-year revenue could reach $200 billion, driven by demand for new Blackwell chips.
- Recent news and developments, such as the strategic partnership with HUMAIN and the expansion in the Middle East, are expected to positively influence the company's future performance.
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Summary:
- NVIDIA is a leading technology company with strong financial performance, driven by its dominant position in the GPU and accelerated computing markets.
- Strengths: Strong revenue growth, high profitability, robust cash flow generation, and a leading position in the AI infrastructure market.
- Weaknesses: Decreasing gross profit margin due to export control charges, slightly weakening short-term liquidity, and reliance on a few major customers.
- Opportunities: Expanding presence in the data center market, strategic partnerships in the Middle East, and increasing demand for AI inference workloads.
- Threats: U.S. export restrictions on sales to China, increasing competition, and regulatory risks around AI technologies.
- NVIDIA's overall financial health is strong, with a low debt-to-equity ratio and efficient asset utilization.
- Critical factors for future performance include managing the impact of export restrictions, maintaining its competitive edge in the AI market, and successfully executing its growth strategies.
- Areas requiring further monitoring include short-term liquidity, gross profit margin trends, and the impact of competition on market share.
- NVIDIA presents a compelling investment profile with high growth potential, but investors should be aware of the associated risks and volatility. The company's valuation appears reasonable given its growth prospects, but potential headwinds from export restrictions and competition should be considered.
Price history
Fundamentals
Insights
- NVIDIA exhibits strong revenue growth and profitability, driven by increasing demand for its products and services, particularly in the data center and AI markets.
- The company maintains a solid liquidity position, although the decreasing current and quick ratios suggest a need for careful monitoring of short-term obligations.
- NVIDIA's conservative financing strategy, characterized by a low debt-to-equity ratio, contributes to its long-term solvency and financial stability.
- The company's capital allocation strategy is balanced, with investments in organic growth, strategic acquisitions, and shareholder returns.
- Export controls and geopolitical tensions pose potential risks to NVIDIA's future revenue and profitability, particularly in the China market.
Analysis
- Revenue
- Revenue has shown strong and consistent growth, driven by increasing demand for NVDA's products and services.
- The YoY revenue growth exceeds the 5-year CAGR, indicating accelerated growth.
- This growth is linked to new product launches, market expansion, and pricing strategies.
- Profitability
- NVDA maintains strong profitability, with a high net profit margin compared to the industry average.
- However, the net profit margin has been decreasing, suggesting a potential decline in overall profitability.
- The one-time charge related to export controls should be considered when evaluating the company's sustainable earnings.
- Liquidity
- NVDA has a strong liquidity position, with ample cash and short-term investments.
- However, the current and quick ratios are decreasing and below the industry average, suggesting a need for careful monitoring of short-term liquidity.
- The company's ability to meet its short-term obligations with its most liquid assets is declining.
- Solvency
- NVDA's long-term solvency appears stable, with a low debt-to-equity ratio and consistent long-term debt levels.
- The company uses less debt financing compared to its peers, indicating a conservative financing strategy.
- The company has a strong ability to service its debt compared to peers.
- Operational Efficiency
- NVDA demonstrates efficient asset utilization, as indicated by its high return on average assets.
- However, the return on average assets has been decreasing, suggesting a potential decline in asset utilization efficiency.
- The company's capital expenditure efficiency appears to be good, as past investments have contributed to strong revenue and profit growth.
- Cash Flow Analysis - NVDA exhibits strong cash flow generation, with a high free cash flow margin. - The company's cash flow to total debt ratio is significantly above the industry average, indicating a strong capacity to cover its debt obligations with its cash flow. - Total capital expenditure is significantly above the industry average, indicating that NVDA is investing heavily in its operations compared to its peers.
- Risk Factors
- The increasing current liabilities and decreasing current ratio could be a potential area of concern if not managed effectively.
- The impact of export controls on the China market, as discussed in the SEC filings, could affect future receivables and inventory levels.
- The one-time charge related to export controls should be considered when evaluating the company's sustainable earnings.
- Future Outlook
- Future financial performance is projected to remain strong, driven by continued revenue growth and profitability improvements.
- The company's financial flexibility should allow for continued investments in R&D, acquisitions, and shareholder returns.
- Key metrics to monitor include the current ratio, debt-to-equity ratio, inventory turnover, revenue growth, gross margin, operating margin, and net income.
- Profitability
Financial statements
Public filings
- NVIDIA is a leading provider of accelerated computing solutions, particularly for data centers, AI, and graphics applications, with a diversified customer base across cloud, enterprise, gaming, and automotive markets.
- The company is facing significant challenges from evolving global trade restrictions and export control measures, especially related to its exposure to the China market, which could materially impact its revenue and operations.
- NVIDIA's ability to accurately forecast demand and manage its complex supply chain and product transitions is critical, as past missteps have resulted in substantial financial charges.
- Regulatory scrutiny around the responsible development and use of AI technologies is increasing, posing both risks and opportunities for NVIDIA as a major provider of AI computing platforms.
- Macroeconomic factors like inflation, interest rates, and supply chain constraints are creating headwinds that NVIDIA must navigate, potentially impacting its costs, liquidity, and profitability.
- The company's legal matters, particularly the ongoing securities class action lawsuit, represent an overhang that could result in further financial and reputational impacts if not resolved favorably.
- Overall, NVIDIA appears to be navigating a complex and rapidly evolving landscape, with both significant growth opportunities and substantial risks that will require careful execution and strategic positioning to overcome.
Core Business and Operations:
- NVIDIA is a leading technology company that pioneered accelerated computing to solve complex computational problems
- The company operates in two main segments:
- Compute & Networking: Includes data center accelerated computing platforms, AI solutions, networking, automotive platforms, and cloud computing services
- Graphics: Includes GPUs for gaming, professional visualization, cloud-based computing, and automotive infotainment
- NVIDIA's products and platforms are used across a wide range of industries, including cloud computing, enterprise, gaming, automotive, and more
- Key customers include cloud service providers, consumer internet companies, enterprises, automakers, and system integrators
- Major competitors include AMD, Intel, Huawei, Qualcomm, and others offering competing semiconductor and computing solutions
Industry and Market Trends:
- The computing industry is experiencing a rapid shift towards accelerated computing and AI, driven by the growing complexity and scale of AI models and applications
- There is increasing regulatory focus on the responsible development and use of AI technologies, with new rules and restrictions emerging in the U.S., EU, and other regions
- Geopolitical tensions and export control measures, particularly between the U.S. and China, are creating significant uncertainty and disruption in global semiconductor supply chains
- Macroeconomic factors like inflation, interest rates, and supply chain constraints are impacting the semiconductor industry and NVIDIA's operations
Recent Events:
- NVIDIA introduced its new Blackwell architecture for data center computing, which is seeing strong demand
- The company incurred a $4.5 billion charge in Q1 FY2026 due to new U.S. export control requirements on its H20 products for the China market
- NVIDIA is increasing its U.S.-based manufacturing to strengthen supply chain resilience and meet growing demand for AI infrastructure
Risk Factors:
- Risks related to accurately forecasting demand and managing supply/inventory, which has led to significant financial impacts in the past
- Exposure to global trade restrictions and export control measures, which could limit the company's ability to serve certain markets
- Reliance on a limited number of key customers and partners, creating concentration risk
- Potential for quality issues, production delays, and inventory write-downs due to complex product transitions
- Regulatory risks around the responsible development and use of AI technologies
- Macroeconomic factors like inflation, interest rates, and supply chain constraints
Legal Matters:
- Ongoing securities class action lawsuit related to statements about channel inventory and cryptocurrency mining impact
- Derivative lawsuits related to the same issues, which remain stayed pending resolution of the securities class action
Management's Discussion and Analysis:
- Revenue growth driven by strong demand for data center compute and networking platforms, particularly for AI applications
- Gross margins impacted by charges related to H20 product excess inventory and purchase obligations
- Increasing operating expenses due to higher compensation, infrastructure, and engineering costs for new product introductions
- Healthy liquidity position with $53.7 billion in cash, cash equivalents, and marketable securities as of Q1 FY2026
- Continued capital return to shareholders through share repurchases and dividend payments
Earnings calls
Earnings Report 2026Q1 (2025-05-28)
Key takeaways
- Blackwell Ramp is Critical: The rapid ramp-up of Blackwell is essential to offset the negative impact of the H20 export ban and drive future growth.
- Inference is a Major Growth Driver: The surge in inference demand, particularly for reasoning AI, represents a significant growth opportunity for NVIDIA.
- Export Controls Pose a Risk: The H20 export ban and potential future restrictions on sales to China could materially impact NVIDIA's revenue and market share.
- Sovereign AI is an Emerging Market: The increasing investment in sovereign AI infrastructure by various countries presents a new growth engine for NVIDIA.
- Enterprise AI is Gaining Momentum: The readiness of enterprise AI, supported by NVIDIA's RTX Pro and DGX systems, is poised to modernize IT infrastructure.
- Networking is a Key Differentiator: NVIDIA's networking solutions, including NVLink and Spectrum X, are crucial for optimizing AI workloads and improving cluster utilization.
Focus of management’s prepared remarks
- Data Center Growth: Data center revenue grew significantly, driven by AI workloads transitioning to inference and the build-out of AI factories. Blackwell's ramp was the fastest in the company's history, contributing nearly 70% of data center compute revenue.
- H20 Export Controls: New export controls on H20 impacted revenue, resulting in a $4.5 billion charge due to inventory write-down and purchase obligations. The company is evaluating options to supply data center compute products compliant with revised export control rules.
- Blackwell Ramp and GB200: The Blackwell ramp is progressing rapidly, with major hyperscalers deploying thousands of GB200 GPUs per week. GB300 systems are sampling, with production shipments expected later this quarter, leveraging the same architecture and footprint as GB200 for seamless transition.
- Inference Demand: A sharp jump in inference demand is being witnessed, driven by increased token generation from OpenAI, Microsoft, and Google. Blackwell NBL72 is significantly improving AI inference throughput.
- AI Factory Deployments: The pace and scale of AI factory deployments are accelerating, with nearly 100 NVIDIA-powered AI factories in flight, a twofold increase year-over-year.
- Agentic AI: The transition from generative to agentic AI, capable of perceiving, reasoning, planning, and acting, will transform industries. The Llama NemoTron family of open reasoning models is designed to supercharge agentic AI platforms.
- Networking Growth: Sequential growth in networking resumed, driven by customers leveraging the platform to scale up and scale out AI factory workloads. NVLink shipments exceeded $1 billion in Q1.
- Gaming Revenue: Gaming revenue reached a record, driven by strong adoption of Blackwell architecture by gamers, creatives, and AI enthusiasts.
- Automotive Growth: Automotive revenue increased, driven by the ramp of self-driving across customers and robust end demand for NEVs.
- Guidance: Q2 revenue is expected to be $45 billion, plus or minus 2%, with modest sequential growth across all platforms. GAAP and non-GAAP gross margins are expected to be 71.8% and 72%, respectively.
Focus of the analyst Q&A
- China Revenue Impact:
- Clarification on the financial impact of the H20 export ban, including the magnitude of lost revenue and the potential for future impact.
- Questions about the possibility of shipping modified versions of GPUs to China in the future.
- AI Spending and Build-Out:
- Inquiries about the progress of the trillion-dollar AI spending outlined at GTC and whether the build-out will be uniform across different spenders.
- Concerns about potential periods of digestion in AI infrastructure spending.
- GPU Cluster Investments:
- Questions about the scale and magnitude of announced and unannounced large GPU cluster investments.
- Impact of these orders on lead times for Blackwell and current visibility.
- Guidance and Business Drivers:
- Clarification on the Q2 revenue guidance, particularly regarding the impact of the H20 export ban and the strength of other business segments.
- Assessment of the primary drivers for the better-than-expected performance in the non-China business.
- Networking Business Strength:
- Seeking additional details on the strength of the networking business, particularly the adoption of Ethernet solutions at CSPs.
- Questions about changes in network attach rates.
- Inference Demand:
- Understanding the company's ability to serve the increasing demand for inference, especially related to reasoning models.
- Determining the size of the inference business and the necessity of full-on NBL72 Rackscale solutions for reasoning inference.
Summary
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Financial Performance
NVIDIA reported a strong Q1 fiscal 2026 with revenue of $44 billion, up 69% year-over-year, exceeding their initial outlook. Data center revenue was a significant driver, growing 73% year-over-year to $39 billion. Gaming revenue also reached a record $3.8 billion, up 48% sequentially and 42% year-over-year. However, the company took a $4.5 billion charge related to H20 inventory and purchase obligations due to new US export controls. GAAP gross margins were 60.5%, and non-GAAP gross margins were 61%. Excluding the H20 charge, non-GAAP gross margins would have been 71.3%. The company returned a record $14.3 billion to shareholders through share repurchases and dividends.
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Revenue Drivers
Data center revenue was primarily driven by the ramp of Blackwell GPUs and the transition of AI workloads to inference. The introduction of GB200 NBL systems significantly contributed to data center compute revenue. Gaming revenue was boosted by strong adoption of Blackwell architecture by gamers, creatives, and AI enthusiasts. Networking revenue also contributed significantly, growing 64% quarter-over-quarter to $5 billion, driven by Spectrum X adoption. The H20 export ban negatively impacted revenue from China, with a meaningful decrease expected in Q2.
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Profit Margins and Cost Management
GAAP and non-GAAP gross margins were 60.5% and 61%, respectively. Excluding the H20 charge, non-GAAP gross margins would have been 71.3%. The company expects GAAP and non-GAAP gross margins to be 71.8% and 72%, respectively, in Q2, driven by better Blackwell profitability. Operating expenses increased due to higher compensation and employee growth, reflecting investments in infrastructure capabilities and AI solutions. The company expects full-year fiscal year 2026 operating expense growth to be in the mid-thirty percent range.
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Guidance and Outlook
NVIDIA expects Q2 revenue to be $45 billion, plus or minus 2%. Modest sequential growth is anticipated across all platforms, with the Blackwell ramp partially offset by a decline in China revenue due to the H20 export ban, resulting in a loss of approximately $8 billion in H20 revenue for Q2. GAAP and non-GAAP gross margins are expected to be 71.8% and 72%, respectively. The company is working towards achieving gross margins in the mid-seventies range later this year. Full-year fiscal year 2026 operating expense growth is expected to be in the mid-thirty percent range.
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Strategic Initiatives
Key strategic initiatives include the Blackwell ramp, expansion of AI factory deployments, development of agentic AI platforms, and partnerships for AI-powered cybersecurity. The company is also focused on onshore manufacturing, with TSMC building fabs in Arizona and partnerships with Foxconn and Wistron to construct AI supercomputer factories in the US. NVIDIA is also expanding its networking offerings with NVLink and Spectrum X. The company is also focusing on sovereign AI, partnering with countries to build national AI platforms.
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Management Commentary
Management expressed confidence in the company's growth prospects, highlighting the increasing demand for inference and the potential of agentic AI. They emphasized the importance of US leadership in AI and the need to support collaboration with top developers globally. Management also discussed the impact of export controls on the China market and the company's efforts to explore limited ways to compete. The overall tone was optimistic, with a focus on the long-term growth potential of AI and NVIDIA's position in the market. Jensen Huang stated, "The age of AI is here," underscoring the company's readiness to capitalize on the opportunities ahead.
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Industry and Market Conditions
The company views AI as a new infrastructure, essential for every country and industry. They noted the increasing demand for AI factories and the transition from generative to agentic AI. The company also highlighted the importance of sovereign AI, with countries investing in national AI platforms. Export controls and geopolitical factors are influencing the company's operations, particularly in the China market. The company sees significant opportunities in enterprise AI, telco infrastructure, and industrial AI.
News evaluation
Sentiment rating:Positive
Jun 21, 2025Summary
The overall sentiment regarding NVIDIA Corp. is positive, driven by its dominant position in the AI infrastructure market and strong revenue growth. Analysts highlight the company's significant market share in GPUs and its robust ecosystem, which positions it well for future growth. However, there are concerns about potential competition and market saturation that could impact margins. Despite these risks, the outlook remains optimistic, with projections for continued revenue growth and a solid market cap increase through 2030.
Key takeways
Nvidia is a top buy in the AI sector due to its critical role in AI infrastructure, and analysts predict Nvidia will continue to grow as AI infrastructure demand rises.
Analysts expect Nvidia's full-year revenue could reach $200 billion, driven by demand for new Blackwell chips, and its automotive revenue grew 72% year-over-year.
Analysts predict Nvidia's strong performance in AI and datacenter growth will continue, and its growth opportunities in the Middle East may offset potential declines in the Chinese market.
The ongoing AI revolution positions Nvidia favorably for long-term growth despite recent market challenges, and Nvidia reported a 78% revenue increase to $39 billion in Q4 fiscal 2025.
Nvidia's forward P/E ratio is currently 26, significantly lower than Palantir's 196, and the upcoming earnings report on May 28 is expected to be a significant catalyst for Nvidia's stock price.
News
Nvidia holds over 90% market share in the GPU space as of Q1 2025, and reported a 69% year-over-year revenue increase in Q1 2025.
Nvidia's data center revenue reached $39.1 billion in Q1 FY 2026, a 73% increase year-over-year, and its Blackwell architecture is designed to meet increasing demand for AI inference workloads.
Nvidia will issue a quarterly dividend of $0.01 per share on June 27, 2025, and its revenue is projected to reach $43 billion in Q1 fiscal 2026, a 64% increase year-over-year.
Nvidia is set to report fiscal Q1 2026 earnings on May 28, with expected revenue of $43 billion, a 65% year-over-year increase, and the company anticipates a $5.5 billion charge related to U.S. export restrictions on its H20 chip.
Nvidia reported Q1 2026 revenue of $44.06 billion, a 69% increase year-over-year, and the company incurred a $4.5 billion charge due to U.S. export controls affecting its H20 chips.
Nvidia reported a 78% revenue increase to $39 billion in Q4 fiscal 2025, and secured a deal to supply hundreds of thousands of GPUs to Saudi Arabia's Humain AI start-up, potentially worth $15 billion to $20 billion.
NVIDIA launched RTX PRO Servers to accelerate AI factory transitions in enterprise IT, and introduced the Isaac GR00T platform for humanoid robot development.
Nvidia is set to report quarterly earnings on May 28, with expectations of approximately $43 billion in revenue, and its revenue from the data center segment surged 93% year-over-year to $35.58 billion in Q4 fiscal 2025.
Nvidia announced a strategic partnership with HUMAIN to enhance AI capabilities in Saudi Arabia, and its market cap has surged back above $3 trillion, reflecting a 50% increase from its April low.
Nvidia reported Q4 FY2025 sales of $39.3 billion, a 78% increase year-over-year, and its stock has risen 5% since April 15, 2025.
Nvidia's forward P/E ratio is under 25 and PEG ratio is 0.5, indicating potential undervaluation, and its GPUs hold a market share of 70% to 95% in the AI chip market.
Analysis
Analysts believe Nvidia's commitment to innovation will keep it ahead of competitors, and its growth is projected to continue despite challenges from custom chip designs.
Analysts predict Nvidia's gross margins will remain strong due to ongoing demand and limited supply, but AWS's strategy to develop its own chips could challenge Nvidia's market dominance.
Analysts express concerns over Nvidia's near-term AI spending outlook following a significant stock price increase, and Huang's aggressive innovation strategy may lead to rapid depreciation of older GPUs, potentially harming customer relationships.
Wall Street analysts favor Nvidia over Palantir due to its strong market position and growth prospects, but concerns exist regarding competition from companies developing their own AI solutions, which could impact Nvidia's market share.
Analysts expect strong performance in Q3 and Q4, supported by expanding AI adoption and new product launches, and Morgan Stanley believes the downside related to export restrictions is fully priced into the stock.
Jay Goldberg at Seaport Research has a sell rating on Nvidia with a target price of $100, indicating a potential 30% downside, but analysts maintain a bullish outlook on Nvidia's long-term growth despite short-term challenges.
Oppenheimer estimates the total addressable global sovereign AI market could be $1.5 trillion, which could significantly benefit Nvidia, and analysts predict Nvidia will continue to thrive as AI infrastructure investments grow.
Despite potential competition from customers developing their own chips, demand for Nvidia's products remains strong, and analysts predict Nvidia's growth could exceed market expectations, driven by strong demand for AI infrastructure.
Despite high valuations, Nvidia's growth potential in AI justifies its premium price, and Nvidia's expansion into new markets could help mitigate losses from export restrictions.
Wall Street analysts favor Nvidia over Palantir due to its strong market position and growth prospects, and Druckenmiller's regret over selling Nvidia shares indicates potential for future price appreciation.
Analysts predict Nvidia will continue to grow as AI infrastructure demand rises, but Nvidia's projected 9% annual returns through 2030 reflect a maturing business model.
Trends
Nvidia's data center platform revenue has surged dramatically, and its Blackwell architecture is designed to meet increasing demand for AI inference workloads, indicating a strong focus on AI-driven growth.
Nvidia plans to release a cheaper Blackwell AI chip for the Chinese market, and its growth opportunities in the Middle East may offset potential declines in the Chinese market, reflecting a strategy to navigate geopolitical challenges.
Nvidia reported a significant revenue increase and secured a major deal in Saudi Arabia, highlighting its expansion in the AI sector and strategic partnerships to drive growth.
Risk factors
The author of article 1 warns of potential market corrections and competition affecting Nvidia's stock, and concerns exist regarding increasing competition from Chinese rivals impacting Nvidia's market share.
Concerns exist about Nvidia's ability to maintain pricing power as competition increases, and the reliance on a few major customers, including Amazon, could pose risks to Nvidia's market position.
Nvidia is expected to lose $8 billion in revenue in Q2 due to U.S. export restrictions, and analysts predict Nvidia's stock could reach $220 or drop to $100, reflecting differing views on its future performance.
Nvidia could lose $2.5 billion in sales due to U.S.-China trade restrictions, and AWS's strategy to develop its own chips could challenge Nvidia's market dominance.
The potential loss of access to the Chinese market could materially affect Nvidia's growth, and Nvidia received its first Wall Street sell rating with a price target of $100.
Comparative analysis
Benchmarks (as of 2025-06-04)
- Performance Comparison:
- NVIDIA Corp. (NVDA) has consistently outperformed the Technology Select Sector SPDR Fund (XLK) across all measured time periods. For instance, over the past three years, NVDA has delivered a total return of 656.65% compared to XLK's 73.45%. This outperformance is evident in shorter time frames as well, such as the YTD performance where NVDA returned 2.62% versus XLK's 2.26%, and the one-month performance where NVDA returned 25.0% versus XLK's 10.83%.
- Risk and Return Analysis:
- NVIDIA has provided higher annualized returns compared to XLK. Over the past three years, NVDA's annualized return was 96.32%, significantly higher than XLK's 20.15%. However, NVIDIA has also exhibited higher annualized volatility. For example, in Q2 2022, NVDA's volatility ranged from 64.6% to 79.08%, while XLK's ranged from 37.06% to 41.59%. The maximum drawdown for NVDA was -66.34% on 2022-10-14, which is substantially larger than XLK's maximum drawdown of -33.56% on 2022-10-12. This indicates that NVDA carries a higher level of risk.
- Risk-Adjusted Performance:
- NVIDIA's Sharpe Ratio is generally higher than that of XLK, suggesting that NVDA offers better risk-adjusted returns. However, this advantage has fluctuated over time. For example, in Q3 2023, NVDA's Sharpe Ratio ranged from 1.72 to 2.59, while XLK's ranged from 0.51 to 1.4. NVIDIA's Beta is consistently higher than XLK's, indicating that NVDA is more sensitive to market movements. As of Q2 2025, NVIDIA's Beta ranges from 2.07 to 2.14, while XLK's Beta ranges from 1.39 to 1.41.
- Overall Assessment:
- NVIDIA has demonstrated significant outperformance compared to the Technology Select Sector SPDR Fund (XLK) across various time horizons. However, this outperformance comes with higher volatility and greater drawdowns, as evidenced by its maximum drawdown of -66.34% compared to XLK's -33.56%. While NVIDIA generally offers better risk-adjusted returns, as indicated by its higher Sharpe Ratio, its higher Beta suggests greater sensitivity to market movements. Investors should consider their risk tolerance and investment objectives when evaluating NVDA relative to XLK.
Peers Price History(as of 2025-06-04)
- Performance Comparison:
- NVIDIA Corp. (NVDA) has demonstrated strong historical performance over the past 2 and 3 years, with returns of 267.39% and 656.65% respectively. However, its year-to-date performance is only 2.62%. Without performance data for Advanced Micro Devices, Inc. (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM), a direct comparison is not possible.
- Risk and Return Analysis:
- NVIDIA Corp. (NVDA) has annualized returns of 91.68% and 96.32% over the past 2 and 3 years, respectively. The annualized volatility for NVDA has fluctuated, with recent values around 36.6% as of Q4 2024. The maximum drawdown for NVDA was -66.34% on 2022-10-14, indicating significant risk during market downturns. Without data for AMD and TSM, a comparative analysis of risk and return is not possible.
- Risk-Adjusted Performance:
- NVIDIA Corp. (NVDA) has shown fluctuating Sharpe Ratios, with a recent value of 0.63 as of Q4 2024. The Beta value for NVDA is 2.09 as of Q4 2024, indicating higher sensitivity to market movements compared to the overall market. Without data for AMD and TSM, a comparative analysis of risk-adjusted performance is not possible.
- Overall Assessment:
- NVIDIA Corp. (NVDA) has demonstrated strong historical returns but also exhibits high volatility and significant drawdown risk. The high Beta value suggests that NVDA's performance is closely tied to overall market movements. Without comparative data for Advanced Micro Devices, Inc. (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM), it is challenging to provide a comprehensive relative assessment.
Peers Fundamentals(as of 2025-04-30)
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Market Position and Size:
- NVIDIA (NVDA) has a significantly larger market capitalization of $3,462,848 million compared to Advanced Micro Devices (AMD) at $192,265.61 million and Taiwan Semiconductor Manufacturing (TSM) at $1,049,624.18 million.
- NVDA's substantial market cap is supported by its high revenue of $148,515 million, EBITDA of $88,248 million, and Net Income of $76,774 million, all of which are significantly higher than AMD and TSM.
- NVDA holds a dominant market position within its peer group due to its significantly larger size and strong financial performance.
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Profitability and Efficiency:
- NVDA's Gross Profit Margin of 70.11% is significantly higher than AMD's 45.15% and TSM's 56.02%, and far exceeds the industry average of -40.07%.
- NVDA's EBITDA Margin of 59.42% is lower than TSM's 68.81% but substantially higher than AMD's 21.54% and the industry average of -1950.36%.
- NVDA's Net Profit Margin of 51.69% is higher than AMD's 8.03% and TSM's 41.68%, and significantly exceeds the industry average of -1877.28%.
- NVDA demonstrates superior profitability compared to its peers and industry standards, which is consistent with its larger market capitalization and revenue.
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Financial Health and Stability:
- NVDA's Current Ratio of 3.39 and Quick Ratio of 2.96 are higher than AMD (2.8 and 1.97, respectively) and TSM (2.39 and 2.18, respectively), but lower than the industry average (4.36 and 3.57, respectively).
- NVDA's Total Debt to Total Equity Ratio of 12.27 and Debt / EBITDA of 0.1 are lower than TSM (23.69 and 0.49, respectively), AMD (8.17 and 0.7, respectively) and the industry average (64.11 and 12.97, respectively).
- NVDA maintains a strong liquidity position and a conservative debt profile relative to its market cap and peer group.
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Valuation and Market Perception:
- NVDA's Enterprise Value To Sales of 18.1 and Price To Sales Ratio of 23.52 are significantly higher than AMD (5.95 and 6.95, respectively), TSM (8.41 and 10.85, respectively), and the industry average (12.19 and 14.28, respectively).
- NVDA's Enterprise Value To EBITDA of 30.45 is higher than TSM (12.22) but lower than AMD (27.55) and the industry average (232.96).
- NVDA's Price To Earnings of 45.71 is lower than AMD (86.92) but higher than TSM (26.04) and lower than the industry average (67.67).
- NVDA's Price to Book Ratio of 41.28 is significantly higher than AMD (3.31), TSM (7.57), and the industry average (6.05).
- NVDA's valuation metrics suggest that the market has high expectations for its future growth and profitability, resulting in a premium valuation compared to its peers and industry standards.
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Cash Flow and Capital Management:
- NVDA's Net Operating Cash Flow of $76,158 million and Free Cash Flow of $72,064 million are significantly higher than AMD and TSM.
- NVDA's Total Capital Expenditure of $4,094 million is lower than TSM's $33,278.11 million but higher than AMD's $706 million.
- NVDA exhibits strong cash flow generation capabilities relative to its size, peers, and industry norms.
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Growth and Future Prospect:
- NVDA shows consistently higher growth in Sales/Revenue compared to the peer group average.
- NVDA's EBITDA, Net Income, Basic Earnings per Share, and Free Cash Flow growth rates have fluctuated significantly year-to-year, as indicated by the high standard deviations.
- NVDA's 3-year and 5-year CAGR figures are significantly higher than the peer group average for Sales/Revenue, EBITDA, Net Income, Basic Earnings per Share, and Free Cash Flow.
- NVDA's superior growth rates in key financial metrics indicate a strong competitive position and potential for future market share gains.
- NVDA's Free Cash Flow Margin growth is inferior to peers.
- NVDA's growth rates have been decreasing over the 5-year period for EBITDA, Net Income, Basic Earnings per Share, and Free Cash Flow.
- NVDA's most recent year-over-year growth rates are lower than its 5-year CAGRs for EBITDA, Net Income, and Basic Earnings per Share, indicating a deceleration trend.
- NVDA's growth is primarily concentrated in revenue and earnings-related metrics, with some deceleration in recent periods.
- NVDA's revenue growth is not consistently translating into higher profit margins, as evidenced by the negative growth in EBIT Margin in the most recent year.
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Potential for Investment:
- NVDA presents an attractive investment opportunity due to its dominant market position, superior profitability, efficient returns, strong liquidity, and growth potential.
- However, its premium valuation and recent deceleration in growth rates warrant careful consideration.
- Compared to its peers and industry benchmarks, NVDA offers a compelling combination of size, growth, profitability, and financial stability.
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Key Risks and Considerations:
- NVDA's premium valuation implies high market expectations, which could lead to a correction if growth slows or fails to meet expectations.
- The cyclical nature of the semiconductor industry could impact NVDA's revenue and earnings growth.
- Increased competition from AMD and other players in the GPU and AI chip markets could erode NVDA's market share and profitability.
- Any significant downturn in the global economy or key end markets (e.g., gaming, data centers, automotive) could negatively impact NVDA's financial performance.
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Overall Assessment:
- NVDA exhibits strong overall financial health and performance relative to its peer group and industry averages.
- It has a dominant market position, superior profitability, efficient returns, strong liquidity, and a conservative debt profile.
- While its valuation metrics are premium, they reflect the market's high expectations for its future growth and profitability.