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In the booming artificial intelligence (AI) era, the quest for more robust computing resources is crucial. As AI applications grow in complexity, the demand for advanced computational power surges, placing Nvidia Corporation (NVDA) at the forefront with its cutting-edge graphics processing unit (GPU) technology and AI solutions.
Speaking at Computex 2024 in Taiwan, CEO Jensen Huang highlighted the escalating need for computational power, dubbing it “computation inflation.” As data processing demands soar, traditional computing methods fall short, making Nvidia's accelerated computing essential for cost efficiency.
An overwhelming majority of brokerage firms echo this sentiment, with Goldman Sachs (GS) maintaining a “Conviction Buy” rating and Bank of America (BAC) raising NVDA’s target price to a new Street-high of $1,500, reflecting Nvidia’s pivotal role in the next AI wave.
Ahead of tonight’s highly anticipated 10-for-1 NVDA stock split, here’s a closer look.
About Nvidia Stock
Santa Clara-based chip giant Nvidia Corporation (NVDA) leads the semiconductor industry with a market cap of $3 trillion. Renowned for its high-speed GPUs serving gaming, data centers, and automotive sectors, Nvidia unveiled Project Groot for robots, updated its Isaac platform, and launched Jetson Thor, showcasing AI and robotics innovations. Despite concerns about AI's staying power, rapid adoption persists. Nvidia dominates the AI chip and data center GPU markets with a 95% share, maintaining its leadership amid rising competition.
Its platforms, including the newly introduced NVIDIA NIM, optimize AI model deployment, helping developers swiftly build GenAI applications. By standardizing AI application deployment, Nvidia enables enterprises to maximize infrastructure investments and generate more AI-driven responses efficiently.
Shares of Nvidia have rallied 218.1% over the past 52 weeks, crushing the broader S&P 500 Index's ($SPX) 25.5% returns and the S&P Semiconductor SPDR's (XSD) 17.5% gains over the same time frame. Additionally, Nvidia reached a new all-time high of $1,255.87 in Thursday’s session before pulling back.
In Q1, Nvidia showered shareholders with $7.8 billion through repurchases and dividends. The chip giant, which boasts an 11-year streak of dividend payouts, is increasing its dividend by 150% from $0.04 to $0.10 per share ($0.01, on a post-split basis), payable to its shareholders on June 28.
With an annualized dividend of $0.04 per share and a modest 0.038% dividend yield, Nvidia maintains a conservative 0.94% payout ratio, leaving ample room for growth. Despite the low yield, Nvidia's investors are no doubt more focused on growth, and its stellar total returns easily surpass its “Magnificent 7” tech peers by a significant margin.
In terms of valuation, Nvidia stock trades at 45.42 times forward earnings - higher than the semiconductor industry average of 23.98x, but slightly lower than its own five-year average of 46.28x.
Nvidia’s Q1 Earnings Beats Wall Street Projections
Shares of the graphic chip designer topped $1,000 for the first time in extended trading on May 22 after Nvidia reported fiscal Q1 earnings results that topped Wall Street’s estimates. Its revenue of $26 billion, up by a remarkable 262% year over year, beat projections by 6%.
Nvidia's cornerstone business in data centers, encompassing AI chips and essential server components, surged 427% year over year to $22.6 billion, driven by robust shipments of its Hopper graphics processors, including the H100 GPU. Non-GAAP EPS soared 461.5% annually to $6.12, surpassing expectations.
Nvidia also announced a 10-for-1 stock split, set to take effect after today’s close, which helped to drive its market cap above $3 trillion. While the stock split doesn’t impact the underlying fundamentals, splitting a high-priced stock like NVDA aims to make it more accessible to retail investors.
Looking ahead, management expects $28 billion in revenue for the current quarter, indicating about 8% sequential growth. Non-GAAP gross margin is projected to be 75.5%, plus or minus 50 basis points, maintaining the mid-70% range for the full year.
Analysts tracking Nvidia predict its profit per share to surge by a whopping 113.9% to $25.32 in fiscal 2025, and then another 20.3% to $30.46 in fiscal 2026.
Nvidia's Ambitious AI Vision
Shares of Nvidia rallied sharply to start this week after CEO Jensen Huang delivered his keynote at the Computex trade show, the annual computer expo held in Taiwan.
Huang focused on annual upgrades to AI accelerators, like the upcoming Blackwell Ultra chip and the Rubin platform for 2026. Highlighting Nvidia's role in combating what he termed "computation inflation," Huang emphasized how traditional computing struggles to keep pace with exponentially growing data demands.
He argued that Nvidia’s accelerated computing offers significant cost and energy savings – up to 98% and 97%, respectively. This approach, he claimed, would democratize AI adoption across industries from shipbuilding to healthcare, echoing his vision of AI as a transformative force for global technology advancement.
What Do Analysts Expect for Nvidia Stock?
Following the keynote, Goldman Sachs reaffirmed its “Conviction Buy” rating on Nvidia. Analyst Toshiya Hari described Nvidia as the “standard” in accelerated computing, with further upside driven by significant R&D investments and the “inherent virtuous cycle” of the company’s existing GPU installed base. Hari also expects positive earnings revisions from his Wall Street peers to be an upside catalyst.
Additionally, BofA analyst Vivek Arya raised Nvidia's price target to $1,500 from $1,320 and maintained a “Buy” rating, noting, "Key product announcements continue to bolster NVDA's AI leadership position." The investment firm highlighted new platforms like GB200 NVL2 and MGX, projecting increased opportunities with “millions of GPUs-sized clusters for large hyperscalers as early as 2026.”
Arya added, "We continue to believe NVDA's turnkey system design could sustain 80%+ market share in AI accelerators and generate sustained growth in networking (Ethernet switch to already ramp to multi-billion dollars within a year). With potentially faster Blackwell adoption (increased mainstream AI), we see potential EPS power of $50+ within two years."
Nvidia has a consensus “Strong Buy” rating overall. Of the 40 analysts covering the stock, 35 advise a “Strong Buy,” two give a “Moderate Buy,” and the remaining three suggest a “Hold.”
The stock trades above its mean price target of $1,154.41, but BofA’s new Street-high target price implies the stock could rally as much as 24.5%.
On the date of publication, Sristi Suman Jayaswal 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.
