Nvidia (NASDAQ:NVDA) stock has been on a remarkable run over the past 18 months, with its stock price soaring by over 155% year to date. This impressive rally comes on the back of the robust demand for Nvidia’s Hopper GPU (graphics processing unit) computing platform, a key driver behind the current AI (artificial intelligence) revolution.
The surge in Nvidia’s stock price directly reflects its exceptional financial performance and its pivotal role in AI advancements. For example, in the Q1 (first quarter) of fiscal 2025, Nvidia’s Data Center revenue skyrocketed to $22.6 billion, marking a 427% year-over-year increase. Additionally, the company’s overall revenue surged by 262% year over year, gross margin expanded by 13.8% to reach 78.4%, and EPS (earnings per share) saw a staggering 629% increase.
While these numbers are impressive, the massive rally in Nvidia stock raises concerns about whether the uptrend will likely be sustained.
Given Nvidia’s dominant position in the AI sector, the ongoing demand for its GPUs, and a robust pipeline of new products, there are compelling reasons to believe that the stock’s upward trajectory will continue. Let’s explore the catalysts to understand why I’d buy Nvidia stock even at today’s prices.
Data Center revenue to continue to grow
Nvidia’s Data Center segment has been a major growth driver, with revenue jumping from $4.3 billion in Q1 of fiscal 2024 to $22.6 billion in Q1 of fiscal 2025. This growth trend is expected to persist, fueled by high demand for Nvidia’s Hopper GPU computing platform, which is used in training and inferencing LLMs (large language models) and generative AI applications.
The company’s H100 GPUs continue to see strong demand. Moreover, with the steady improvement in the supply of these GPUs, Nvidia is well-positioned for further revenue growth. Also, the upcoming launch of the H200, which nearly doubles the inference performance of the H100, is set to drive additional demand and revenue.
During the Q1 earnings call, Nvidia’s leadership revealed that demand for the H200 and Blackwell GPUs is already outpacing supply. This trend will continue well into next year. Additionally, Nvidia’s Auto segment is expected to become the largest vertical within the Data Center business this year, creating significant revenue opportunities.
Furthermore, Nvidia’s networking revenue is likely to accelerate within the Data Center business. The company started shipping the new Spectrum-X Ethernet solution optimized for AI. This is expected to become a multi-billion-dollar product line within the next year, further boosting the Data Center segment’s growth.
Gaming revenue to accelerate
In Q1, Nvidia’s Gaming segment generated $2.65 billion in revenue, reflecting an 8% sequential decline but an 18% increase compared to last year. The market reception for Nvidia’s GeForce RTX Super GPUs remains strong, with healthy end demand and channel inventory levels.
Further, with over 100 million GeForce RTX GPUs installed base, Nvidia’s products will see solid demand from gamers, creators, and AI enthusiasts. The exceptional performance of these GPUs in running generative AI applications on PCs indicates a promising growth trajectory for Nvidia’s Gaming revenue in the coming years.
Nvidia to enhance shareholders’ returns
Nvidia’s strong cash flows are likely to translate into increased returns for shareholders through share buybacks and dividends. As of the end of Q1, Nvidia held $31.4 billion in gross cash and $9.8 billion in debt. The company returned $7.8 billion to shareholders, including $7.7 billion in share repurchases and $98 million in cash dividends. This shareholder-friendly approach is expected to continue, providing further upside for investors.
The bottom line
Nvidia’s remarkable stock performance reflects its leadership in the fast-growing AI sector. With robust demand for its Data Center GPUs, promising new product launches, and a commitment to enhancing shareholder returns, Nvidia is well-positioned for continued success.
