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NVIDIA Corp. (NVDA)

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July 06, 2025Undervalued
Compared to:

Advanced Micro Devices, Inc. (AMD) | Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) | Technology Select Sector SPDR Fund (XLK)

Key takeaways
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NVIDIA's current valuation appears moderately undervalued considering its dominant market position in AI/ML, strong financial performance (69% YoY revenue growth), and significant growth opportunities in AI inference and enterprise markets. While the EV/EBITDA ratio of 30.45x is significantly below industry average and the forward P/E of 33x appears reasonable given growth prospects, risks from export controls and competition are not fully offset by the company's strong competitive moat and growth trajectory.

  • NVIDIA's revenue growth remains robust, with a 69% year-over-year increase in Q1 fiscal 2026, driven by strong demand for its AI and data center solutions.
  • The company's gross profit margin decreased to 60.52% in the most recent quarter, primarily due to a $4.5 billion charge related to export controls impacting the China market.
  • NVIDIA's current and quick ratios are below industry averages, suggesting a need for careful monitoring of short-term liquidity, despite overall strong cash flow generation.
  • The Blackwell architecture is expected to be a significant growth driver, particularly in AI inference workloads, and the company is expanding its AI factory business.
  • Recent news and market sentiment are largely positive, with analysts predicting continued growth and raising price targets, although concerns remain regarding geopolitical risks and market volatility.
  • Export restrictions and trade tensions, particularly with China, pose a significant risk to NVIDIA's future revenue and market share.
  • NVIDIA's Enterprise Value to EBITDA ratio suggests it may be undervalued relative to peers, while the Enterprise Value to Sales ratio suggests it may be overvalued.
  • The company's stock price has shown strong performance, outperforming benchmarks like XLK and peers like AMD and TSM over longer periods.
  • NVIDIA is strategically focusing on sovereign AI deals to reduce dependency on large tech firms, exemplified by its partnership to supply AI chips to Saudi Arabia.
  • Despite strong growth prospects, investors should closely monitor NVIDIA's ability to navigate export controls, manage competition, and maintain profitability in a dynamic market environment.
Evaluation summary
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  1. Company Overview:

    • NVIDIA Corp. (NVDA) is a leading technology company specializing in the design and manufacture of computer graphics processors, chipsets, and related multimedia software. The company operates through two main segments: Graphics Processing Unit (GPU) and Compute & Networking.
    • The Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service, Quadro and NVIDIA RTX GPUs for enterprise workstation graphics, virtual GPU (vGPU) software, automotive platforms for infotainment systems, and Omniverse Enterprise software.
    • The Compute & Networking segment consists of Data Center accelerated computing platforms, end-to-end networking platforms (Quantum for InfiniBand and Spectrum for Ethernet), NVIDIA DRIVE automated-driving platform, Jetson robotics and other embedded platforms, NVIDIA AI Enterprise and other software, and DGX Cloud software and services.
    • NVIDIA's peers include Advanced Micro Devices, Inc. (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM). The Technology Select Sector SPDR Fund (XLK) is used as a benchmark.

  2. Financial Performance:

    • NVIDIA's revenue has shown strong growth, increasing from $30.04 billion in the quarter ending July 31, 2024, to $44.06 billion in the quarter ending April 30, 2025, representing a 46.67% increase over that time.
    • Net income has also increased significantly, from $16.60 billion in the quarter ending July 31, 2024, to $18.78 billion in the quarter ending April 30, 2025.
    • The gross profit margin has decreased from 75.15% in the quarter ending July 31, 2024, to 60.52% in the quarter ending April 30, 2025. This decrease is likely due to a $4.5 billion charge related to H20 inventory and purchase obligations due to new US export controls, as noted in the earnings call.
    • Net profit margin has decreased from 55.26% to 42.61% over the same period, also impacted by the export control charge.
    • Return on Average Assets (ROA) has decreased from 78.66% to 75.89%, Return on Average Total Equity (ROE) has decreased from 123.77% to 115.46%, and Return on Average Invested Capital has decreased from 101.04% to 100.55%. These metrics are still significantly above the industry averages of -12.76%, -39.71%, and -23.26%, respectively, indicating strong profitability relative to peers, but the trend is negative.
    • Recent news indicates a 69% year-over-year revenue increase to $44.1 billion in Q1 fiscal 2026, and a 33% rise in non-GAAP earnings to $0.81 per share.

  3. Operational Efficiency:

    • Total current assets have increased from $59.63 billion in the quarter ending July 31, 2024, to $89.94 billion in the quarter ending April 30, 2025, indicating improved liquidity.
    • Total current liabilities have also increased, from $13.97 billion to $26.54 billion over the same period.
    • Working capital has increased from $45.66 billion to $63.39 billion, reflecting the growth in current assets.
    • Net operating cash flow has increased significantly from $14.49 billion to $27.41 billion.
    • Free cash flow to equity has also increased, from $13.51 billion to $26.19 billion.
    • Capital expenditure has increased from $977 million to $1.23 billion, reflecting continued investment in growth.
    • The company returned $14.3 billion to shareholders through share repurchases and dividends, as noted in the earnings call summary.
    • The current ratio has decreased from 4.27 to 3.39, and the quick ratio has decreased from 3.79 to 2.96. While still healthy, these ratios are below the industry averages of 4.36 and 3.57, respectively, suggesting a need for careful monitoring of short-term liquidity.
    • The debt-to-equity ratio has decreased from 17.22% to 12.27%, indicating a conservative capital structure.

  4. Growth Opportunities:

    • NVIDIA is focused on expanding its presence in the data center market, driven by the increasing demand for AI workloads. Data center revenue grew significantly, driven by AI workloads transitioning to inference and the build-out of AI factories, as noted in the earnings call.
    • The company is also investing in the development of agentic AI platforms, which are capable of perceiving, reasoning, planning, and acting.
    • NVIDIA is expanding its networking offerings with NVLink and Spectrum X, which are crucial for optimizing AI workloads and improving cluster utilization.
    • The company is also focusing on sovereign AI, partnering with countries to build national AI platforms.
    • NVIDIA is expanding its AI factory business, with nearly 100 factories in progress, doubling from the previous year, according to recent news.
    • NVIDIA will supply over 18,000 AI chips to HUMAIN for a new data center in Saudi Arabia, as part of its strategy to reduce dependency on large tech firms.

  5. Recent Developments and Market Sentiment:

    • The overall sentiment surrounding NVIDIA is largely positive, driven by strong anticipated revenue growth, strategic partnerships, and favorable market conditions.
    • NVIDIA reported a 114% revenue increase to $130 billion in fiscal 2025, with revenue for fiscal 2025 being $130.5 billion and free cash flow of $60.7 billion.
    • NVIDIA achieved a 69% year-over-year growth rate in Q1 2025 and holds a 92% market share in the GPU market.
    • Loop Capital raised its price target for NVIDIA from $175 to $250, and NVIDIA shares rose nearly 3%, heading for a record close.
    • NVIDIA's stock reached an all-time high of $154.31 on June 25, 2025, and its market cap is approximately $3.9 trillion as of July 2025.
    • However, concerns exist regarding geopolitical risks and macroeconomic factors, introducing a level of uncertainty. Analysts remain divided, with some projecting robust growth while others express caution due to market volatility.

  6. Risks and Threats:

    • NVIDIA faces risks related to accurately forecasting demand and managing supply/inventory, which has led to significant financial impacts in the past, as noted in the SEC filings.
    • Exposure to global trade restrictions and export control measures, particularly between the U.S. and China, could limit the company's ability to serve certain markets. The H20 export ban negatively impacted revenue from China, with a meaningful decrease expected in Q2, as noted in the earnings call.
    • Reliance on a limited number of key customers and partners creates 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.
    • 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, according to recent news.
    • Nvidia's market share in China has dropped significantly due to U.S. export restrictions.

  7. Valuation Analysis:

    • The Enterprise Value to EBITDA ratio is 30.45 as of April 30, 2025, compared to an industry average of 232.96, suggesting that NVIDIA may be undervalued relative to its peers based on this metric.
    • The Enterprise Value to Sales ratio is 18.10, compared to an industry average of 12.19, suggesting that NVIDIA may be overvalued relative to its peers based on this metric.
    • NVIDIA's stock is trading at a forward P/E of 33, which is reasonable given its growth trajectory, according to Barclays.
    • Analysts predict a price target of around $176, with potential upside to $267 if growth continues.

  8. Price Performance:

    • NVIDIA's stock price has shown strong performance in recent months, increasing from $117.05 on May 7, 2025, to $159.34 on July 3, 2025.
    • NVIDIA has generally outperformed the Technology Select Sector SPDR Fund (XLK) over the analyzed periods, particularly in the long term (2 and 3 years).
    • NVIDIA has also outperformed Advanced Micro Devices (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) over the past three years.
    • NVIDIA's stock reached an all-time high of $154.31 on June 25, 2025.

  9. Future Outlook:

    • NVIDIA expects Q2 revenue to be $45 billion, plus or minus 2%, with modest sequential growth across all platforms, as noted in the earnings call.
    • GAAP and non-GAAP gross margins are expected to be 71.8% and 72%, respectively, in Q2.
    • Full-year fiscal year 2026 operating expense growth is expected to be in the mid-thirty percent range.
    • Analysts expect strong performance in Q3 and Q4, supported by expanding AI adoption and new product launches.
    • NVIDIA's Blackwell architecture is expected to drive substantial revenue growth, particularly in AI inference workloads.

  10. Summary:

    • NVIDIA is a leading technology company with strong financial performance, driven by increasing demand for its AI and data center solutions.
    • Strengths: Strong revenue growth, high profitability, robust cash flow generation, and a leading position in the AI chip market.
    • Weaknesses: Decreasing gross and net profit margins, decreasing current and quick ratios, and reliance on a limited number of key customers.
    • Opportunities: Expanding presence in the data center market, developing agentic AI platforms, expanding networking offerings, and focusing on sovereign AI.
    • Threats: Global trade restrictions, export control measures, increasing competition, regulatory risks, and macroeconomic headwinds.
    • NVIDIA's financial health is strong, with a conservative capital structure and ample liquidity. However, the company must carefully manage its short-term liquidity and navigate the risks associated with export controls and competition.
    • Critical factors for future performance include the successful ramp of Blackwell, expansion of AI factory deployments, and development of agentic AI platforms.
    • Areas requiring further monitoring include the current ratio, debt-to-equity ratio, inventory turnover, revenue growth, gross margin, operating margin, and net income.
    • Overall, NVIDIA presents a compelling investment profile, with significant growth potential balanced against identified risks. The company's position relative to analyzed industry trends and recent developments is strong, and potential catalysts include the successful launch of new products and expansion into new markets.
Price history
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Fundamentals
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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.
Financial statements
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Public filings
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  • 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
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Earnings Report 2026Q1 (2025-05-28)

Key takeaways
  1. 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.
  2. Inference is a Major Growth Driver: The surge in inference demand, particularly for reasoning AI, represents a significant growth opportunity for NVIDIA.
  3. 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.
  4. Sovereign AI is an Emerging Market: The increasing investment in sovereign AI infrastructure by various countries presents a new growth engine for NVIDIA.
  5. 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.
  6. 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

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

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Sentiment rating:Positive

Jul 05, 2025
Summary

The overall sentiment surrounding NVIDIA Corp. (NVDA) is largely positive, driven by strong anticipated revenue growth, strategic partnerships, and favorable market conditions. The company has demonstrated resilience in its market cap recovery and is poised for significant earnings growth driven by strong demand for AI technologies. However, concerns regarding geopolitical risks and macroeconomic factors introduce a level of uncertainty. Analysts remain divided, with some projecting robust growth while others express caution due to market volatility. Despite facing challenges such as export restrictions and inventory management, the company's collaboration with Saudi Arabia is expected to enhance its market presence. Overall, NVIDIA's dominant position in the AI chip market and its innovative product developments position it well for future growth, although investors should remain vigilant regarding potential risks.

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Benchmarks (as of 2025-07-03)
Technology Select Sector SPDR Fund (XLK)

  • Performance Comparison:

    • NVIDIA (NVDA) has generally outperformed the Technology Select Sector SPDR Fund (XLK) over the analyzed periods, particularly in the long term (2 and 3 years). For instance, the 3-year performance shows NVDA with a 954.66% return compared to XLK's 102.32%. However, there have been shorter periods, such as the 6-month period, where NVDA underperformed XLK, returning 6.65% compared to XLK's 7.99%.
    • The consistency of NVDA's performance relative to XLK varies. While NVDA shows significant outperformance over longer periods, its performance is more volatile in the short term, leading to periods of underperformance.

  • Risk and Return Analysis:

    • NVIDIA (NVDA) has provided higher annualized returns compared to the Technology Select Sector SPDR Fund (XLK) over the 1, 2, and 3-year periods. For example, the 3-year annualized return for NVDA is 119.3% compared to XLK's 26.48%.
    • NVIDIA (NVDA) is more volatile than the Technology Select Sector SPDR Fund (XLK), as indicated by its higher annualized volatility. For example, in Q4 2022, NVDA's volatility ranged from 51.8% to 69.3%, while XLK's ranged from 26.7% to 43.2%.
    • NVIDIA (NVDA) experienced a maximum drawdown of -66.34% on 2022-10-14, significantly larger than the Technology Select Sector SPDR Fund (XLK) maximum drawdown of -33.56% on 2022-10-12. This indicates a higher risk profile for NVDA.

  • Risk-Adjusted Performance:

    • NVIDIA (NVDA) generally exhibits higher Sharpe Ratios than the Technology Select Sector SPDR Fund (XLK), suggesting better risk-adjusted returns. However, this varies during periods of high volatility. For example, as of July 3, 2025, NVDA's Sharpe Ratio is 0.67 compared to XLK's 0.51.
    • NVIDIA (NVDA) has a beta consistently above 1, indicating that it is more sensitive to market movements than the Technology Select Sector SPDR Fund (XLK). As of July 3, 2025, NVDA's beta is 2.06, while XLK's beta is 1.38.

  • Overall Assessment:

    • NVIDIA (NVDA) offers higher potential returns but comes with significantly higher risk compared to the Technology Select Sector SPDR Fund (XLK). NVDA's higher volatility and larger drawdowns indicate that it may not be suitable for risk-averse investors.
    • A significant trend is NVDA's consistent outperformance over longer periods, driven by its growth and innovation in the semiconductor industry. However, investors should be aware of the stock's higher sensitivity to market fluctuations, as reflected in its higher beta and volatility.
Peers Price History(as of 2025-07-03)
Advanced Micro Devices, Inc. (AMD)Taiwan Semiconductor Manufacturing Co., Ltd. (TSM)
  • Performance Comparison:
    • NVIDIA (NVDA) has shown periods of significant outperformance compared to Advanced Micro Devices (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) over the past three years. Over the last two and three years, NVDA has vastly outperformed both AMD and TSM. However, in the shorter term (Year-to-Date, 1 Week, 1 Month, 6 Months, and 1 Year), NVDA's performance has been mixed, with periods of underperformance compared to TSM. For example, over the past year, NVDA underperformed TSM by 2.9%.
  • Risk and Return Analysis:
    • NVIDIA's annualized returns have been higher than AMD and TSM over the 2-year and 3-year periods. For example, the 3-year annualized return for NVDA is 119.3%, compared to 22.32% for AMD and 47.92% for TSM. This indicates that NVDA has provided higher returns over the long term.
    • NVIDIA's annualized volatility has generally been moderate, with fluctuations over the analyzed period. In the most recent data from Q3 2025, NVDA and TSM show stable, low volatility, while AMD shows stable, but significantly higher volatility.
    • The maximum drawdown for NVDA was -66.34% on 2022-10-14, which is similar to AMD's maximum drawdown of -65.45% on the same date, but more severe than TSM's maximum drawdown of -56.62% on 2022-11-03. This suggests that NVDA and AMD have similar risk profiles, with the potential for significant declines from previous peaks.
  • Risk-Adjusted Performance:
    • NVIDIA's Sharpe Ratio has generally been higher than AMD, indicating better risk-adjusted returns. However, in Q3 2025, TSM had the best risk-adjusted return with a Sharpe Ratio of 0.81, followed by NVDA at 0.67, while AMD had a negative risk-adjusted return of -0.06.
    • NVIDIA's beta has been consistently above 1, indicating that the stock is more volatile than the market. In Q3 2025, NVDA's beta was 2.06, which is similar to AMD's beta of 1.97, but higher than TSM's beta of 1.5. This suggests that NVDA and AMD are more sensitive to market movements than TSM.
  • Overall Assessment:
    • NVIDIA has demonstrated strong long-term performance with high annualized returns, but it also exhibits higher volatility and significant drawdown potential. While NVDA has shown strong long-term performance, its short-term performance has been mixed, and its risk-adjusted returns have fluctuated. In Q3 2025, TSM had the best risk-adjusted return, followed by NVDA, while AMD had a negative risk-adjusted return.
Peers Fundamentals(as of 2025-04-30)
Advanced Micro Devices, Inc. (AMD)Taiwan Semiconductor Manufacturing Co., Ltd. (TSM)

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. 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.

  9. 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.
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