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Valued at a market cap of $3.44 trillion, Nvidia (NVDA) is the largest company in the world. Over the last 10 years, the tech stock has returned nearly 28,000% to shareholders. It means a $1,000 investment in NVDA stock back in June 2015 would be worth roughly $280,000 today.
Despite these outsized gains, analysts remain bullish on the chip maker, which is at the center of the artificial intelligence megatrend. Morgan Stanley recently maintained its “Overweight” rating on Nvidia, calling it a “unique” opportunity and their top semiconductor pick. The investment firm highlighted Nvidia’s strong gross margins, robust non-China revenue, and recovering networking business.
According to Morgan Stanley, short-term rack bottleneck issues are causing inventory buildup at original design manufacturers. However, these issues are expected to be resolved soon, with a tight supply anticipated as demand strengthens.
How Did Nvidia Perform in Fiscal Q1?
Nvidia reported robust fiscal first-quarter (ended in April) results that exceeded Wall Street expectations. It reported revenue of $44.06 billion, a 60% increase year over year and above the estimated $43.31 billion. The chip maker also reported earnings of $0.96 per share compared to estimates of $0.93 per share.
The semiconductor heavyweight’s data center division drove the top line as sales rose 73% year-over-year to $39.1 billion, accounting for 88% of total revenue. This growth was powered by unprecedented demand for AI chips from cloud providers, enterprises, and sovereign nations building artificial intelligence infrastructure.
However, U.S. export controls impacted its results and outlook. For instance, the government's restriction on Nvidia's H20 processor for China forced the company to take $4.5 billion in charges for excess inventory, resulting in $2.5 billion in lost sales during the quarter.
CEO Jensen Huang characterized China as a $50 billion market effectively closed to U.S. industry, warning that export restrictions merely encourage Chinese AI developers to use domestic alternatives.
Despite these headwinds, Nvidia demonstrated strong momentum across its Blackwell product line, which comprised 70% of data center sales. Notably, Microsoft (MSFT) has deployed tens of thousands of Blackwell GPUs and expects to scale to hundreds of thousands, largely driven by its partnership with OpenAI. Nvidia is also seeing surging demand for AI inference applications, where models serve responses to millions of users.
Other segments also showed solid growth, with gaming revenue rising 42% to $3.8 billion and automotive and robotics increasing 72% to $567 million. Looking ahead, Nvidia expects approximately $45 billion in current-quarter sales, which would have been $8 billion higher without China restrictions.
The Bull Case for NVDA Stock
Nvidia is capitalizing on a fundamental shift in artificial intelligence workloads as reasoning models create exponential demand for compute infrastructure, positioning the chip giant at the center of what Huang calls a “new industrial revolution.”
The emergence of reasoning AI represents a shift from traditional one-shot chatbots to sophisticated models that think through problems by using tools and analyzing multiple data sources before generating responses. This computational intensity requires hundreds to thousands of times more processing power, driving demand for Nvidia’s most advanced Blackwell GPUs.
Cloud providers are responding with massive infrastructure investments, deploying nearly 100 AI factories globally in the current quarter alone, double the number from a year ago. The average GPU count per facility has similarly doubled, reflecting the scale requirements for reasoning workloads.
Sovereign AI initiatives are creating new growth vectors as nations recognize artificial intelligence as critical infrastructure comparable to electricity and internet connectivity. Countries across Europe, Asia, and the Middle East are building national AI platforms, with recent announcements including 500-megawatt projects in Saudi Arabia and 5-gigawatt facilities in the UAE.
Enterprise adoption is accelerating as agentic AI demonstrates practical business applications. Nvidia’s partnerships span diverse industries, with Yum! Brands (YUM) implementing AI across restaurant operations and financial institutions like Capital One (COF) using Nvidia solutions to improve chatbot performance. The company’s new RTX Pro enterprise servers integrate AI capabilities with existing IT infrastructure, addressing the $500 billion on-premises market.
Industrial AI applications are emerging as the fourth growth pillar, with companies such as Taiwan Semi (TSM), Foxconn, and Pegatron utilizing Nvidia’s Omniverse platform for virtual factory design, thermal simulations, and defect reduction. The convergence of manufacturing reshoring and AI technology creates opportunities for the intelligent deployment of factories worldwide.
What Is the Target Price for NVDA Stock?
Nvidia’s growth story is far from over, given that analysts expect adjusted earnings to expand from $2.99 per share in fiscal 2025 to $7.31 per share in fiscal 2030. Out of the 44 analysts covering NVDA stock, 37 recommend “Strong Buy,” three recommend “Moderate Buy,” three recommend “Hold,” and one recommends “Strong Sell.” The average target price for NVDA stock is $173, roughly 24% higher than its current price.
