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Semiconductor giant Nvidia (NVDA) has established itself as a technology leader, with a strong presence in several high-growth markets. Its stock has rewarded investors handsomely over the years, and the company's future prospects remain promising, thanks to its leadership in artificial intelligence (AI), gaming, and data centers. While many viable semiconductor industry players exist, Nvidia's high-performance GPUs have propelled it to the forefront.
Nvidia stock, valued at $3.13 trillion, has returned 26,069.6% over the last decade. So far this year, the stock has risen 159.5%, crushing the S&P 500 Index's ($SPX) gain of 17.8%. Given the stock's meteoric rise, Nvidia announced a 10-for-1 forward stock split, which took effect June 7, to make its shares more accessible to employees and investors.
The company will release its second-quarter results on Aug. 28, and Wall Street believes this extraordinary stock has more upside potential. Let's see if now is a good time to buy the stock before it soars even higher.
There's No Stopping Nvidia’s Growth
Nvidia GPUs are the foundation of AI workloads, making them indispensable in data centers. The company's A100 and H100 GPUs are widely regarded as the best in their class for AI processing. Nvidia's Data Center segment accounted for approximately 87% of total revenue in the first quarter, as the segment's revenue increased by 427% year-over-year (YoY).
Revenue from its other segments, Gaming and Professional Visualization, increased by 18% and 45%, respectively. Total revenue of $26 billion surged 262% from the prior-year quarter. Also, adjusted earnings per share (EPS) increased by 461% to $0.61 during the quarter.
Nvidia is also making progress in the autonomous vehicle (AV) sector, offering AI-powered platforms such as NVIDIA DRIVE. The platform is being used by major automakers and startups to develop self-driving cars.
Notably, EV manufacturers, including GAC's AION Hyper, Nuro, BYD (BYDDY), XPENG (XPEV), and others have selected Nvidia's Drive Thor platform. Furthermore, Lucid (LCID) and IM Motors, EV makers in the United States and China, are using Nvidia's Drive Orin platform. The Automotive segment, which is still in its early stages, grew 11% in the quarter, but has significant long-term potential as the adoption of AV technology grows.
Nvidia’s CEO, Jensen Huang, stated, “The next industrial revolution has begun — companies and countries are partnering with NVIDIA to shift the trillion-dollar traditional data centers to accelerated computing and build a new type of data center — AI factories — to produce a new commodity: artificial intelligence.”
Management believes the company is ready for the next wave of growth now that the Blackwell platform, which is expected to power a new era of AI computing, should hit its full stride in 2025, with further comments and color on reported production delays expected on the upcoming earnings call. Furthermore, management expects Spectrum-X to open up a completely new market for the company, alongside its new software offering, NVIDIA NIM.
Despite its aggressive expansion plans, Nvidia's asset-light model means that it has a sturdy balance sheet, with a cash balance (cash, cash equivalents, and marketable securities) of $31.4 billion at the end of the first quarter. Its debt-to-equity ratio is also low, at 0.17. It also generated a positive free cash flow balance of $14.9 billion in Q1.
Nvidia will release its second-quarter fiscal 2025 results on Aug. 28. Management expects a revenue increase of 107.2% (plus or minus 2%) to $28 billion. Similarly, analysts anticipate revenue in the same range, with earnings per share of $0.64 for the quarter.
Over the next two years, analysts are looking for fiscal 2025 revenue and earnings to increase by 98.3% and 110.9%, respectively, with fiscal 2026 revenue and earnings expected to increase by 38.5% and 39.3%, respectively.
Nvidia's future looks promising, with numerous growth opportunities ahead. The continued adoption of AI across industries is expected to increase demand for its GPUs. Furthermore, its investments in the gaming, autonomous vehicle, and professional visualization markets solidify the company's long-term prospects.
What Does Wall Street Say About Nvidia Stock?
Recently, Susquehanna analyst Christopher Rolland reiterated a "buy" rating on NVDA stock, citing the company's financial health and market position, as well as strong demand in the AI market. Rolland has a $160 target price for the stock.
Furthermore, HSBC analysts just raised the target price for Nvidia stock from $135 to $145, with a "buy" rating. The firm believes that Nvidia will exceed its sales projections for the remaining quarters of fiscal 2025.
Overall, on Wall Street, NVDA has a “strong buy” rating. Out of the 39 analysts in coverage, 34 have a “strong buy” recommendation, with two “moderate buy” ratings and three “hold” ratings. Based on the average analyst target price of $141.65, the stock could rise 10.2% from current levels. Its Street-high estimate of $200 indicates an upside potential of 55.6% over the next 12 months.
The Bottom Line on Nvidia Stock
Currently, Nvidia stock trades at 46 times forward fiscal 2025 estimated earnings, compared to its five-year historical average price-to-earnings ratio of 69.3x.
While Nvidia appears to be trading at a premium, the company's growth prospects extend beyond AI. In March, Jim Cramer, host of CNBC's Mad Money, stated that he believes Nvidia will “create the next industrial revolution.” For a $3 trillion market cap company with a solid balance sheet and a plethora of resources, I believe Nvidia can find exciting opportunities in any new trends that emerge in the future, boosting its revenue prospects. All things considered, Nvidia remains a top AI stock to buy now.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
