In recent times, there’s no corporation that has garnered as much interest as the pioneering tech company, Nvidia (NVDA). Known for its exceptional graphics processing units (GPUs), which are instrumental in artificial intelligence (AI) training, this company has managed to captivate investors in an extraordinary manner.
Over the past five years, this leading AI company has experienced an astonishing growth of 1,590%. In contrast, the S&P 500 index has only increased by 95% during the same period. It’s evident that investors are captivated by the business, viewing it as a successful venture that will continue to thrive in the rapidly evolving AI-driven technological landscape.
Is Nvidia still worth considering for novice investors or those seeking to expand their holdings, given that its shares are currently at an all-time high?
Incredible financial performance
As I stand by, the escalating interest in Nvidia’s data center GPUs is simply astounding. From fiscal year 2020 to fiscal year 2025, the company’s overall revenue skyrocketed at a staggering compound annual growth rate of 64%. Even more remarkable, during the first quarter of fiscal year 2026 (ending April 27), their total revenue spiked an impressive 69% compared to the previous year, reaching a whopping $44.1 billion.
Nvidia’s earnings are noteworthy, fueled by robust pricing capabilities. Last quarter alone, they reported an impressive net income of $18.8 billion, with their average net profit margin for the last five years reaching a remarkable 36%.
In my viewpoint, it’s undeniable that Nvidia’s outstanding financial success is chiefly attributed to its unparalleled dominance in the field of Artificial Intelligence. By strategically establishing itself as a crucial provider of tools and resources for AI development, Nvidia has solidified its role as a key player in the construction of the foundation upon which future AI platforms and applications will be built. Ultimately, the fortunate shareholders of Nvidia can reap rewards regardless of whether it’s OpenAI’s ChatGPT, Anthropic’s Claude, or Alphabet’s Gemini that takes the spotlight – as long as the global AI industry continues to flourish and grow.
Investors shouldn’t overlook key risk factors
Nvidia has revealed that it anticipates exporting and marketing its H20 chips in China soon, following the U.S. government’s approval of their export license applications. This decision comes after restrictions on exports caused a loss of approximately $2.5 billion in potential H20 chip revenue during the previous quarter, as reported by the company’s management.
The recent approval represents a promising step since it restores access to a significant AI chip market. However, this event underscores the fluid nature of trade relations. The Trump administration is known for its swift policy changes, and given that AI technology has growing geopolitical implications, ongoing tensions between the U.S. and China could potentially impact Nvidia’s future operations. It’s crucial not to underestimate this risk.
Additionally, there’s the doubt about how a potential recession could impact AI investments. If the economy weakens, business leaders may reduce their investment plans, potentially straining Nvidia’s sales.
Nvidia’s valuation is hard to believe
Few stocks have experienced such dramatic growth as Nvidia has in recent years. In fact, over the last five years, its share price has risen almost 17 times over! Despite concerns about the company becoming too large or its market capitalization, currently at $4.2 trillion, reaching a ceiling, Nvidia keeps defying doubters’ expectations. It’s challenging to accept that its current valuation remains reasonable given its remarkable growth trajectory.
As a stock market enthusiast, I’m thrilled to see shares hitting record highs! Yet, the forward price-to-earnings ratio stands at an impressive 39.9. However, this doesn’t seem overpriced when you consider the consensus analyst estimate predicting an annualized EPS growth of a staggering 32% from fiscal years 2025 to 2028. This rapid growth makes the seemingly high valuation appear quite reasonable!
Given Nvidia’s significant influence within the tech sector, its remarkable expansion, and high profit margins, the argument for purchasing their stocks stays convincing, despite it being close to all-time high prices.
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2025-07-22 17:48