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Semiconductor giant Nvidia (NVDA) is at the epicenter of the artificial intelligence (AI) megatrend, and is effectively selling shovels amid a gold rush. The company's graphics processing units (GPUs) power advanced AI applications like ChatGPT, and are an essential piece of AI computing architecture - a key advantage at a time when Big Tech companies are investing heavily in generative AI platforms that require massive computational resources for training and deployment.
Nvidia enjoys an 80% market share in the AI-powered GPU business, and its products have demonstrated an efficient handling of workloads.
As a result, the stock has been on an absolute tear in the last two years, rising over 931% since October 2022. Valued at a market cap of $3.07 trillion, NVDA stock has returned a monstrous 25,472% in the last decade. That suggests a $1,000 investment in NVDA stock 10 years ago would be worth more than $250,000 today.
After this massive outperformance, is it too late to invest in Nvidia - or is the stock still a good buy today?
Nvidia CEO Says Blackwell Chip Demand is “Insane”
In an interview with CNBC last week, Nvidia CEO Jansen Huang said that demand for its next-generation AI chip, Blackwell, is “insane.” The Blackwell chip, which will be launched soon, costs between $30,000 and $40,000 per unit and has attracted interest from companies such as Microsoft (MSFT), Meta (META), and OpenAI.
The Blackwell chips are equipped with fifth-generation tensor cores that support new floating point data types, enabling more efficient computations and processing times. Nvidia explains that its tensor core is optimized for deep learning tasks and accelerates the training and inference processes.
Reports earlier indicated that the Blackwell chip was delayed due to a minor design flaw that impacted its manufacturing. However, Huang claims that Blackwell is the world’s most powerful chip and will help customers run generative AI platforms at a much lower cost, as it will reduce energy consumption compared to the Hopper and other legacy chips.
“At a time when the technology is moving so fast, it gives us an opportunity to triple down, to really drive the innovation cycle so that we can increase capabilities, increase our throughput, decrease our costs, decrease our energy consumption,” Huang told CNBC. “We’re on a path to do that, and everything’s on track.”
Is Nvidia Stock a Good Buy?
Nvidia should continue to be a primary beneficiary of the AI boom if the tech giant can maintain its leadership position, and deliver strong revenue growth and robust profit margins. In fiscal Q2 of 2025 (ended in July), Nvidia reported revenue of $30 billion, an increase of 122% year over year. Its gross margins of 75% allowed Nvidia to increase operating margins by 174% year over year to $17.6 billion in Q2.
According to Phil Panaro, a former advisor at the Boston Consulting Group, the rapid growth of AI and the launch of Blackwell processors should allow Nvidia to end fiscal 2031 with sales of $600 billion, compared to just $55.7 billion in fiscal 2024. Analysts tracking NVDA expect sales to rise to $125.5 billion in 2025, $178 billion in 2026, and $207 billion in 2027, on average. This suggests that Nvidia would have to triple sales between fiscal 2027 and fiscal 2031 to meet Panaro's lofty estimates.
The Wall Street consensus forecasts adjusted earnings to expand from $1.19 per share in 2024 to $4 per share in 2026. So, priced at 31x forward earnings, NVDA stock is reasonably priced, despite its spectacular rally.
Out of the 41 analysts tracking NVDA stock, the overwhelming consensus is a “strong buy.” The average 12-month target price for NVDA stock is $149.99, indicating an upside potential of 20% from current levels.
On the date of publication, Aditya Raghunath 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.
