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The surge in artificial intelligence (AI) stocks over the better part of the past two years has proven to be much more than just a momentary fad, but rather the start of a massive megatrend with implications for nearly every industry. This is just one report suggesting that the AI market is poised to reach a size of $2.74 trillion by 2032, displaying an incredible CAGR of 20.4% between 2024 and 2032 - and there are many more with similarly bullish projections.
And if there has been any stock that has been representative of the AI juggernaut, it's Santa Clara-based Nvidia (NVDA), the designer and seller of specialized GPUs. Up an eye-popping 2,848% over the past five years, the stock's stellar run has continued in 2024, rising 138.5% on a YTD basis. The stock also offers a modest dividend yield of 0.02%.
However, since occupying the coveted position of the world's most valuable company for a brief period last week, shares of the chipmaker have been on a downward spiral, sliding 16% from its peak. In fact, Monday's session marked the stock's worst decline in the last two months.
Profit-taking after the stock's stellar run higher is one likely reason for the selling, as NVDA was significantly overbought on a technical basis prior to the pullback. That said, some market-watchers are also casting a wary eye toward heavy insider selling on Nvidia stock among the recent weakness.
Heavy Insider Selling on NVDA
As Nvidia was racing with Microsoft (MSFT) and Apple (AAPL) for the title of world's most valuable company, Nvidia insiders were busy dumping their shares.
That includes co-founder and CEO Jensen Huang. On June 21, Huang sold 240,000 shares at an average price of $131.49 for a total value of about $31.56 million. Earlier this month, Huang had sold shares worth $63.1 million over two tranches. Following the sales, Huang's ownership stake in NVDA now stands at 35.2%, which is still a pretty healthy stake.
And it's not just Huang; other Nvidia insiders have been selling, as well. On June 21, CFO Colette Kress sold NVDA stock worth $12.7 million, while long-time director Tench Coxe unloaded $119 million worth of stock earlier this month.
So, should you hit the panic button and sell NVDA, just like company insiders?
In short, no. As we've explained previously, these type of insider stock sales make for easy headlines - but the underlying explanation typically isn't as straightforward. Frequently, executives at growth-fueled tech companies like Nvidia are compensated in stock, to some degree, and sales like the ones you see listed above are often carried out as part of scheduled plans that are set in place months or years in advance. That effectively strips these stock sales of any useful sentiment read, like the clues we might be able to glean from insider buying.
That takeaway is echoed by Mark Lehmann, CEO of Citizens JMP Securities, who says the record level of insider selling on NVDA is notable, but not alarming.
That's why you shouldn't necessarily sell NVDA stock here. But should you be a buyer? Let's take a closer look.
Nvidia Crushes Earnings Expectations
Nvidia's financial position remains as solid as ever, as can be gauged from its latest results for the first quarter. In Q1 2025, Nvidia continued on its impressive run of beating revenue and earnings expectations.
Specifically, the company reported record quarterly revenues of $26 billion, up a whopping 262% from the previous year, as its core data center revenues shot up by 427% in the same period to $22.6 billion. Nvidia's adjusted EPS rocketed by 461.5% on a YoY basis to $6.12, comfortably beating estimates.
The company generated net cash from operating activities of $15.34 billion, compared to just $2.91 billion in the year-ago quarter. Moreover, Nvidia closed the quarter with a cash balance of $31.44 billion, much higher than its debt levels of $14 billion.
Nvidia has been on a tear for the past five quarters. Not only have they consistently beaten analyst expectations, but they've also delivered impressive quarterly earnings growth.
For Q2 2025, the company expects revenues of $28 billion. Meanwhile, analysts are forecasting a forward revenue growth of 80.21% for the company, compared to the tech sector median of 6.57%.
Overall, the past 10 years have seen the company grow its revenue and EPS at a CAGR of 33.99% and 56%, respectively.
Alongside its quarterly results, Nvidia announced its 10-for-1 stock-split to attract more investors to its stock, which set off a wave of similar announcements in the industry.
Blackwell & Other Drivers
Nvidia unveiled its Blackwell platform of chips in March, and the company is betting big on it. Touted as an improvement over its Hopper architecture, launched two years ago, the Blackwell platform boasts significant improvements in cost and energy efficiency compared to its predecessor. As context, each of Nvidia's H100 chips consumes 700W of energy at peak operation, which is more than the annual electricity consumption of countries like Georgia, Costa Rica, and Guatemala.
Enter Nvidia's Blackwell platform, which was launched earlier this year. It promises to slash costs by up to 25x for tasks like training giant AI models, saving significant power for the same performance. Production is underway, with availability coming later in 2024. Nvidia isn't resting – their successor, Rubin, is already in the works for a 2026 launch.
Looking ahead, management is confident in continued growth through 2025 and beyond. This optimism is fueled by the shift to accelerated computing, an explosion of generative AI applications, strong growth in enterprise and consumer internet sectors, and the development of sovereign AI.
Nvidia's got software muscle, too. Their Nvidia Inference Microservices (NIMs), unveiled at GTC this year, are production-ready containers that simplify deploying AI models at scale. NIMs slash deployment times from weeks to minutes, according to Nvidia. They work across Nvidia's massive CUDA-enabled GPU base of hundreds of millions and support a wide range of models, including open-source options like Meta's (META) Llama 3.
Bullish Analyst Opinion
Analysts continue to remain bullish about Nvidia stock, even as they've raced to keep up with price-target hikes post-stock split. The consensus rating is a "Strong Buy” with a mean target price of $129.97, indicating an upside potential of about 10% to Monday's close.
Out of 40 analysts covering the stock, 35 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 3 have a “Hold” rating.
