Admittedly, there are uncertainties to predicting this base, given the combination of company-specific and broader external influences, such as macroeconomic conditions and market risk appetite. Yet, the stock’s biggest intraday drop since May 2023 at the close of last week has dialed up the volume on concerns over whether Nvidia’s currently lofty valuation and growth expectations are sustainable. Admittedly, demand for AI chips will eventually normalize as the build-out phase of related compute capacity and infrastructure progresses to scale phase. But demand moderation is unlikely within the near-term, as industry remains in the early stages of its transition from training to inferencing – which is where the bulk of compute demand will stem from.
Anticipated momentum in higher-margin data center sales will also reinforce the sustainability of Nvidia’s gross margin in the mid-70% range as guided by management. This accordingly provides incremental durability to its valuation premium to peers over the next year. The anticipated acceleration in inferencing workloads, as recently developed AI solutions go to market, is also expected to complement Nvidia’s data center sales. Inferencing refers to the process of generating output from AI solutions deployed, such as responses on ChatGPT queries.
The platform allowed the company’s GPUs to be used for more than rendering graphics, and would eventually prove to be one of Nvidia’s biggest advantages in the explosively growing world of artificial intelligence and machine learning. When, in 2004, the SLI connection standard was released, Nvidia saw a huge bump in the processing power it could achieve on a single machine. It was after 2005 when Nvidia stock price started generating interest and attention but still faced peaks and troughs. Unsurprisingly, this level of growth has brought Nvidia onto the radar of more investors. Ultimately, this has resulted in more buying activity — leading to an eye-popping addition of $1 trillion to Nvidia’s market cap in less than two months. This same time frame would also make sense in 2024, as Nvidia’s annual meeting occurs in June.
Our updated fundamental forecast for Nvidia, taking into consideration its actual F4Q24 performance and F1Q25 guidance, expects revenue growth of 90% to $115.9 billion in FY 2025. This will be primarily led by consistent sequential expansion in data center sales. The chipmaker has been seeing soaring demand for its semiconductors, which are used to power artificial intelligence, or AI applications.
Stock , NVDA
That’s Nvidia’s net margin, or the percentage of revenue that gets turned in profit. Looked at another way, almost 50 cents of every $1 in revenue Nvidia took in last year went to its bottom line. The amount Nvidia Corp.’s market value increased on Thursday alone, according to FactSet. The previous record one-day jump was Meta Platform’s gain of $205 billion on Feb. 2 of this year. In other words, Nvidia’s one-day gain is more than the total market values of market stalwarts Bank of America ($265 billion) and Coca-Cola ($263 billion).
- The platform allowed the company’s GPUs to be used for more than rendering graphics, and would eventually prove to be one of Nvidia’s biggest advantages in the explosively growing world of artificial intelligence and machine learning.
- Specifically, our forecast expects annual data center revenue growth to be halved through FY 2028.
- The company’s history of stock splits suggests that another one could be imminent.
- Namely, the company has investments in voice-recognition company SoundHound AI as well as data analytics start-up Databricks.
Based on historical observations, Nvidia should experience some renewed volatility through next week as its annual GTC keynote progresses. But momentum is expected to pick up gradually post-GTC, and more prominently approaching the F1Q25 period-end and on the heels of said earnings release. This accordingly underscores further expansion in the market for AI accelerators and GPUs, which Nvidia thrives in. And continued resilience in Nvidia’s core demand environment is corroborated by the elevated level of ongoing and impending investments into the nascent technology. For instance, OpenAI’s Sam Altman has been pursuing an ambitious plan to build a $7 trillion venture for the development of artificial general intelligence that will outsmart humans.
Therefore, management teams often consider splitting their stocks around this nice, round number. Furthermore, Nvidia’s management team has a history of enacting stock splits. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. Not only are sales skyrocketing, but Nvidia’s commanding position in the graphics processing unit (GPU) and data center business has provided the company with unparalleled pricing power. This has helped it expand its margins materially — improvements that flow directly to the bottom line.
And this number is likely to expand through FY 2025 and beyond, as CPU-based data centers transition to accelerated computing for improved efficiency and TCO in handling increasingly complex inferencing workloads. This will inadvertently reinforce demand for all of Nvidia’s data center solutions tailored for https://www.dowjonesrisk.com/ the AI revolution, spanning GPUs, accelerators, networking solutions to enable scalability, and full stack software. The big questions is where the broader semiconductor peer group multiple trendline will be – i.e., what is the base to Nvidia’s anticipated valuation premium leading up to its F1Q25 earnings.
NVIDIA Estimates* in USD
The company’s revenue more than tripled in the latest quarter compared with the same period a year earlier. However, not every investor (especially those outside the U.S.) has access to this capability. In that sense, Nvidia’s potential stock split becomes a real factor since more investors can purchase the stock without fear of overweighting their portfolio to one company. If you only have $100 to invest this month, a stock changing hands at $1,000 per share feels out of reach (even if fractional shares are available in your favorite stock brokerage).
Though it primarily develops hardware, Nvidia is quietly making inroads into enterprise software. Its software services business reached an annual revenue run rate of $1 billion last year — a great milestone, but still much smaller than its $47 billion compute networking business. The company’s breakthroughs in compute networking are impacting a multitude of AI applications, including machine learning, generative AI, and large language models (LLMs). Nvidia is currently the nucleus of most systems powering modern AI tools, and investors have been cheering on the stock. Euphoria surrounding the possibilities of artificial intelligence (AI) technology is pushing the stock market to record levels.
Based on Nvidia’s ability to market itself as both a hardware and software solution, as well as the potential of its savvy investments, I see its journey as just starting. Using dollar-cost averaging to gradually build a position in the stock would be a prudent strategy, helping to mitigate risk while providing you with exposure to the long-term upside of Nvidia and the AI realm. Despite its ultra-premium valuation, I see Nvidia’s stock as a solid opportunity for long-term investors. At a macro level, heavy secular tailwinds fuel AI budgets, and I don’t expect those to abate anytime soon. In the wake of the surge in Nvidia’s stock, the company’s valuation multiples have become a bit extended. Moreover, Nvidia’s forward price-to-earnings (P/E) ratio of 37 is nearly double that of the S&P 500.
Our February tracker showed a sharp jump in Nvidia’s premium to the peer group trendline to 122%, deviating from the consistent preceding average premium of ~93% by almost 30 percentage points. We believe this jump was to account for market’s front-running in anticipation of a strong F4Q24 report and F1Q25 guidance. And this materialized, with consensus growth estimates for Nvidia through FY 2027 increasing by 19% on average post F4Q24 earnings, compared to estimates for the same period observed prior. Taken together, we believe any dips below the $900-level for Nvidia leading up to its next earnings release would represent a buy opportunity for further upside potential in the near-term.
NVIDIA Management
They include improvements to GPU supply to fill backlogged demand and favorable H200 pricing with shipment ramp-up. Nvidia’s key customers across the cloud computing and enterprise segments have also echoed resilient capex and R&D prioritization within the foreseeable future for AI developments during the latest earnings season. This will inadvertently reinforce demand for supporting infrastructure, which includes AI chips for accelerated computing data centers and full stack Nvidia software. An exception was observed in February, shortly after Nvidia finished the fiscal fourth quarter.
The stock is expensive, but worth the premium
Nvidia has posted a 5% on average over the course of the four-day event, followed by an immediate, yet brief, pullback, which could mark an opportunity for upside potential leading up to its next earnings release. And market’s steadfast confidence in Nvidia’s widening lead in the heated AI race is evident in the stock’s swift recovery this week. Our analysis shows that Nvidia is currently trading exactly at where it should be.
So if you’re looking for a stock split announcement, stay tuned to Nvidia’s Q1 FY 2025 results, which will be reported sometime in late May. The company’s history of stock splits suggests that another one could be imminent. In 2015, Nvidia dove head-first into the artificial intelligence space, releasing its first “Drive” chip for autonomous driving in cars, as well as its “Jetson” chip made for embedded computing on smaller AI-powered devices. Namely, the company has investments in voice-recognition company SoundHound AI as well as data analytics start-up Databricks. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.