Amid the continued excitement around artificial intelligence, NVIDIA NVDA has been on an incredible surge with no signs of a slowdown. The chipmaker topped $3 trillion in market cap, surpassing Apple AAPL and becoming the second-most valuable company in the United States. NVIDIA hit the $1 trillion mark in May 2023 and reached $2 trillion by February 2024, surpassing Amazon AMZN and Alphabet GOOGL.
NVIDIA stock has risen more than 140% year to date and 200% over the past year. It is by far the biggest outperformer among the so-called “Magnificent Seven.” NVIDIA has a Zacks Rank #1 (Strong Buy), a solid Growth Score of A and a Momentum Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
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After this stellar run, many investors are concerned about the sustainability of its growth trajectory. But NVIDIA is primed for more growth in the months ahead, given solid company fundamentals. Let’s delve deeper to find out the reasons.
AI Leader
NVIDIA has been at the forefront of technology companies racing to build AI into their products and services. NVIDIA founder and CEO Jensen Huang said, “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.”
NVIDIA has an estimated 80% market share in AI chips for data centers, which are attracting billions of dollars in spending from big cloud vendors. Its next-generation GPU chip is expected to drive another round of massive growth for the chip maker. Last weekend, the AI chipmaker unveiled a high-powered version of its Blackwell chip — called the Blackwell Ultra — slated to release in 2025, followed by a new AI chip platform, Rubin, in 2026. The company will debut an Ultra version of Rubin in 2027. Its first Blackwell processors are slated for delivery later this year, replacing the widely popular Hopper generative AI chips.
While NVIDIA’s GPUs are unmatched for training AI models, Advanced Micro Devices AMD and Intel are pushing forward with their own AI chips that will heighten competition. NVIDIA is also facing increasing competition from its own customers, such as Amazon, Google and Microsoft, who are striving to reduce their reliance on NVIDIA chips to cut down on capital expenditures. However, these companies will take time to garner market share.
Stock Split: A Big Boost
NVIDIA sparked a retail frenzy following the 10-for-1 stock split news. At the close of the market today, NVDA will undergo a 10-for-1 stock split, which means that for each NVIDIA share that an investor owns, they will receive an extra nine after the split is completed. Thus, NVIDIA’s stockholders will receive a higher number of shares at lower prices. This will make its shares more affordable to a wider range of investors, including the ones who make small trades, and increase liquidity.
In a stock split, the company increases the number of shares, reducing the share price. However, the total dollar value of all shares outstanding remains the same and doesn’t affect the company’s valuation.
The stock split will also likely pave the way for NVIDIA’s inclusion in the Dow Jones Industrial Average, like Amazon, which joined the index earlier this year after undergoing a 20-for-1 stock split in June 2022.
Solid Earnings Picture
The AI chipmaker reported blockbuster first-quarter fiscal 2025 results, topping both earnings and revenue estimates. The blockbuster results were driven by incredible demand for NVIDIA’s electric circuits, known as graphics processing units (GPUs), and data centers. Data Center revenues jumped 427% year over year to a record $22.6 billion, buoyed by strong and accelerating demand for generative AI training and inference on the Hopper platform.
For the second quarter of fiscal 2025, the graphics chipmaker provided a bullish revenue outlook of around $28 billion, plus or minus 2%.
NVIDIA saw solid earnings estimate revisions of $2.79 and $5.25 over the past 30 days for fiscal 2025 and 2026, respectively. Its earnings surprise history is good, as it delivered an earnings surprise of 18.43%, on average, in the last four quarters.
Attractive Valuation
After an explosive surge over the past year, NVIDIA’s valuation does not seem overstretched, given that its earnings are growing faster than the share price. Though NVIDIA is currently trading at a P/E ratio of 47.79 versus the industry average of 46.06, it is relatively cheap compared to its rival chipmaker AMD having a P/E ratio of 63.62.
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Bulls Roar
Wall Street analysts are going more bullish on NVIDIA and continue to boost their price targets. This week, Bank of America called NVIDIA a “top pick,” reiterating its buy rating on the stock and raising its price target to $1,500 from $1,320. As the chipmaker is accelerating its product upgrade cycle, the analyst believes the move will “continue to bolster NVIDIA’s AI leadership position.” Post-earnings, at least 28 of the 58 brokerage firms have raised their price targets on the stock, according to the recent LSEG data.
Bottom Line
NVIDIA is expected to continue to dominate the AI chips market with its flagship AI GPUs and its CUDA software. The stock will start trading on a split-adjusted basis at market open on Jun 10. The split will not change the company’s underlying value but is expected to make the stock more appealing to retail investors.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
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