Nvidia (NASDAQ: NVDA) was the best performing stock in the US S&P500 (SNPINDEX: ^GSPC) over the past five years, with shares up 2,890%. The company completed two stock splits during that period. The first was the 4-for-1 stock split in July 2021, and the second was the 10-for-1 stock split in June 2024.
Despite the huge profits, Wall Street is still bullish on the semiconductor company. Of the 65 analysts who follow Nvidia, 92% give the stock a buy rating and the remaining 8% give the stock a hold rating. Furthermore, Nvidia’s average price target of $150 per share implies an upside of 14% from the current share price of $132.
Here’s what investors need to know about this artificial intelligence stock.
Nvidia is the foundation of the artificial intelligence movement
Nvidia designs the most coveted graphics processing units (GPUs) in the computer industry. GPUs perform engineering calculations faster and more efficiently than central processing units (CPUs), allowing them to accelerate complex workloads such as artificial intelligence (AI). Nvidia has more than 80% market share in AI processors for data centers, and its leadership is rooted in CUDA.
Nvidia introduced its CUDA programming model in 2006. It turned GPUs (originally designed for computer graphics) into general-purpose chips that could accelerate all kinds of applications. The CUDA ecosystem now includes hundreds of software libraries that streamline development workflows across a range of disciplines, from data analytics and machine learning to scientific simulation and computational chemistry.
No other chipmaker offers comparable developer tools, so Nvidia GPUs have become the gold standard. “Year after year, Nvidia responded to the needs of software developers by pumping out specialized code libraries, allowing a huge range of tasks to be run on its GPUs at speeds impossible with conventional, general-purpose processors like those made by Intel And AMD,” according to The Wall Street Journal.
More recently, Nvidia has moved further into software and services with AI Foundry and AI Enterprise. The former allows companies to adapt pre-trained large language models on Nvidia’s supercomputing infrastructure, and the latter simplifies the development of AI applications for use cases such as content generation, robotics and predictive analytics. “Nvidia software will end the year with a $2 billion run rate,” CEO Jensen Huang recently told analysts.
Finally, Nvidia has further strengthened its leadership and increased its ability to monetize AI by expanding into new vertical data center hardware. “We literally build the entire data center and can monitor, measure and optimize everything,” Huang explains. Importantly, Nvidia has established a leading position in generative AI networking equipment, and demand for the first data center server CPU (Grace) is very high among supercomputing customers.
The bottom line: Nvidia is more than a chipmaker. It is a full-stack accelerated computing company with products spanning hardware, software and services. The breadth of its portfolio, coupled with the best-in-class performance of its GPUs, gives Nvidia a competitive position that rival chipmakers will struggle to overcome.
Nvidia stock is trading at a reasonable valuation compared to Wall Street forecasts
Nvidia reported second-quarter financial results that exceeded expectations. Revenue rose 122% to $30 billion thanks to particularly strong growth in the data center segment, and non-GAAP earnings rose 152% to $0.68 per diluted share.
“Nvidia achieved record revenue as global data centers ramp up to modernize the entire computing stack with accelerated computing and generative AI,” said Huang. The chart below shows Nvidia’s revenue growth across its four major business segments.
|
Segment |
Q2 2024 |
Q2 2025 |
Change |
|---|---|---|---|
|
Data center |
$10.3 billion |
$26.3 billion |
154% |
|
Gaming and AI PC |
$2.5 billion |
$2.9 billion |
16% |
|
Professional visualization |
$379 million |
$454 million |
20% |
|
Automotive and robotics |
$253 million |
$346 million |
37% |
|
Total |
$13.5 billion |
$30 billion |
122% |
Data source: Nvidia. Note: Q2 2025 ended in July 2024.
In the near term, Nvidia has a major catalyst in the upcoming launch of its Blackwell GPU. The next-generation chip can process AI training and inference tasks four times faster and 30 times faster, respectively, compared to the previous Hopper architecture. Blackwell’s production line will begin in the fourth quarter of fiscal 2025 (ending January 2025). CEO Jensen Huang says this will likely be the most successful product in the history of the computer industry.
Looking further ahead, Grand View Research says sales of AI accelerators will increase 29% annually through 2030, while spending on AI hardware, software and services will increase 36% annually over the same period. Nvidia is one of the companies best positioned to benefit from this. CFRA’s Angelo Zino says Nvidia “will be the most important company for our civilization over the next decade as the world becomes more AI-driven.”
Wall Street estimates that Nvidia’s revenues will grow 37% annually over the next three years. That consensus makes the current valuation of 62 times earnings seem reasonable. Those numbers give Nvidia a PEG ratio of 1.7, a discount to the three-year average of 3.1. Patient investors can confidently buy a small position in Nvidia today, and they should plan to add a few more shares if the stock experiences a pullback of 10% or more.
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Trevor Jennevine has positions at Nvidia. The Motley Fool holds positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: Short November 2024 $24 Calls on Intel. The Motley Fool has a disclosure policy.
1 Stock-split Artificial Intelligence (AI) Stock Up 2,890% in 5 Years to Buy Now, According to Wall Street Originally Published by The Motley Fool
