NVIDIA Corp. (NVDA) | Company valuation, comparison, AI analysis | Thematic | AI powered fundamental research and development platform

Key takeaways

NVIDIA's current valuation appears moderately overvalued, primarily due to its exceptionally high valuation multiples (P/E: 45.79, EV/EBITDA: 47.79) compared to historical and industry averages. While the company's strong financial performance and dominant position in the rapidly growing AI market justify a premium valuation, the current price seems to be pricing in an overly optimistic scenario, leaving little room for potential setbacks or increased competition.

NVIDIA's Q3 2025 earnings report showcased impressive results, with record revenue of $35.1 billion, a 94% year-over-year increase, and adjusted EPS of $0.81, exceeding the consensus estimate of $0.75. This strong performance, driven largely by the data center segment's 112% year-over-year growth, further solidified NVIDIA's position as a market leader.
The company's inclusion in the Dow Jones Industrial Average on November 8th also reflects investor confidence. However, the stock's post-earnings decline highlights concerns about valuation and the sustainability of such rapid growth.
Analysts remain largely bullish, but caution is warranted given the high expectations and potential for market corrections. The strong demand for Blackwell chips, with a 12-month backlog, suggests a positive outlook, but concerns about supply chain constraints and increasing competition remain.
Despite these challenges, NVIDIA's strong fundamentals and innovative product pipeline suggest a positive long-term outlook.
NVIDIA's high valuation multiples pose a significant risk to its stock price. The company's high P/E ratio makes it susceptible to market corrections if investor sentiment shifts or growth slows. This risk is amplified by concerns about the sustainability of its current growth trajectory.

Evaluation summary

Company Overview:
- NVIDIA Corp. (NVDA) is a technology company that designs and manufactures computer graphics processors (GPUs), chipsets, and related multimedia software. The company operates through two main segments: Graphics and Compute & Networking. The Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service, Quadro and NVIDIA RTX GPUs for enterprise workstation graphics, vGPU software, automotive platforms for infotainment systems, and Omniverse Enterprise software for metaverse and 3D internet applications. The Compute & Networking segment consists of Data Center accelerated computing platforms, networking platforms including Quantum for InfiniBand and Spectrum for Ethernet, NVIDIA DRIVE automated-driving platform, Jetson robotics and other embedded platforms, NVIDIA AI Enterprise and other software, and DGX Cloud software and services.
- NVIDIA's revenue is primarily driven by its Data Center segment, which accounted for $30.8 billion in revenue during Q3 2025, representing a 112% year-over-year growth. The Gaming segment contributed $3.3 billion in revenue, while the Professional Visualization segment generated $486 million. The Automotive segment reached a record $449 million in revenue.
- For comparative analysis, the benchmarks used are the Technology Select Sector SPDR Fund (XLK) and industry peers Advanced Micro Devices, Inc. (AMD) and Taiwan Semiconductor Manufacturing Co., Ltd. (TSM).
Financial Performance:
- NVIDIA's revenue has been growing rapidly, reaching $35.1 billion in Q3 2025, a 94% year-over-year increase. This growth is primarily driven by the strong demand for its Data Center products, particularly the H200 GPU, which experienced the fastest product ramp in the company's history.
- The company's gross margin was 74.6% in Q3 2025, slightly down sequentially due to a mix shift towards more complex, higher-cost Data Center systems. Operating expenses increased sequentially due to higher compute, infrastructure, and engineering development costs.
- NVIDIA's ROA, ROE, and ROIC are significantly above the industry average, highlighting its efficient use of resources to generate profits. The company's ROA was 84.01% in Q3 2025, while its ROE was 127.21% and its ROIC was 106.31%.
- NVIDIA's financial performance has been strong, with high revenue growth and profitability, but gross margins have been impacted by inventory provisions and product mix shifts. The company continues to invest heavily in R&D and new product development to maintain its technology leadership, while also returning capital to shareholders through share repurchases.
Operational Efficiency:
- NVIDIA's balance sheet shows a strong liquidity position, with $38.5 billion in cash, cash equivalents, and marketable securities as of Q3 2025. The company's working capital has been increasing, reaching $51.2 billion in Q3 2025, indicating a strong ability to meet short-term obligations.
- NVIDIA generates significant cash flow from its operations, reaching $17.6 billion in Q3 2025. The company is investing heavily in capital expenditures, reaching $813 million in Q3 2025, reflecting its commitment to growth and innovation.
- NVIDIA's free cash flow has been growing steadily, reaching $16.8 billion in Q3 2025. The company's free cash flow margin was 48% in Q3 2025, indicating a high level of operational efficiency.
- NVIDIA has a low level of debt, with a debt-to-equity ratio of 15.52% and a debt-to-EBITDA ratio of 0.12 in Q3 2025. The company's strong cash flow generation further supports its solvency position.
Growth Opportunities:
- NVIDIA is expanding its market reach by focusing on enterprise and industrial AI, leveraging its existing strengths and expanding into new market segments. The company is also investing in sovereign AI initiatives globally, collaborating with major CSPs, enterprises, and governments to deploy its AI infrastructure at scale.
- NVIDIA's R&D pipeline is robust, with the company investing heavily in new product development, including the Blackwell GPU architecture, which is expected to drive significant growth in the data center segment.
- NVIDIA is expanding geographically, with significant progress in sovereign AI initiatives in India and Japan. The company is also expanding its presence in the automotive market, with record automotive revenue driven by Orin and strong end-market demand.
- NVIDIA's strategic focus areas include the continued development and ramp of the Blackwell platform, expansion into the enterprise and industrial AI markets with NVIDIA AI Enterprise and Omniverse, and growth in sovereign AI initiatives globally. The company is actively collaborating with major CSPs, enterprises, and governments to deploy its AI infrastructure at scale. The focus on software, services, and support is evident in the projected annualized revenue growth in this segment.
Recent Developments and Market Sentiment:
- NVIDIA's Q3 2025 earnings report showcased impressive results, with record revenue of $35.1 billion, a 94% year-over-year increase, and adjusted EPS of $0.81, exceeding the consensus estimate of $0.75. This strong performance, driven largely by the data center segment's 112% year-over-year growth, further solidified NVIDIA's position as a market leader. The company's inclusion in the Dow Jones Industrial Average on November 8th also reflects investor confidence. However, the stock's post-earnings decline highlights concerns about valuation and the sustainability of such rapid growth. Analysts remain largely bullish, but caution is warranted given the high expectations and potential for market corrections. The strong demand for Blackwell chips, with a 12-month backlog, suggests a positive outlook, but concerns about supply chain constraints and increasing competition remain. Despite these challenges, NVIDIA's strong fundamentals and innovative product pipeline suggest a positive long-term outlook.
- The overall market sentiment towards NVIDIA is slightly positive, with analysts largely bullish on the company's long-term prospects. However, concerns about valuation, competition, and geopolitical risks warrant caution.
Risks and Threats:
- NVIDIA faces significant supply chain challenges and risks due to semiconductor industry constraints, extended lead times, and complex global trade regulations, especially export controls targeting China. The company's reliance on third-party suppliers and long manufacturing lead times creates supply chain vulnerabilities. The company is exposed to complex and evolving global trade regulations, export controls, and geopolitical tensions.
- NVIDIA faces competition from larger, diversified competitors and new market entrants. The company is subject to cybersecurity breaches and data protection/privacy compliance risks.
- NVIDIA's high valuation multiples pose a significant risk to its stock price. The company's high P/E ratio makes it susceptible to market corrections if investor sentiment shifts or growth slows. This risk is amplified by concerns about the sustainability of its current growth trajectory.
- Increasing competition from other chip manufacturers and companies developing in-house solutions poses a significant risk to NVIDIA's market share and pricing power. This competition could lead to a slowdown in revenue growth and pressure on profit margins. NVIDIA's ability to innovate and maintain its technological leadership will be crucial in mitigating this risk.
- Geopolitical factors, such as trade tensions with China and potential export restrictions, pose significant risks to NVIDIA's supply chain and revenue streams. These external factors could disrupt manufacturing, limit sales in key markets, and impact the company's overall financial performance. NVIDIA's diversification efforts aim to mitigate these risks.
Valuation Analysis:
- NVIDIA's EV/EBITDA ratio was 47.79 in Q3 2025, while its EV/Sales ratio was 30.71. These ratios are significantly higher than the industry average, indicating that the company is trading at a premium valuation.
- The company's high valuation is justified by its strong fundamentals, high growth potential, and dominant market position in the AI market. However, investors should be aware of the potential for a market correction if growth slows or investor sentiment shifts.
Price Performance:
- NVIDIA's stock price has been on an upward trend over the past year, with a 2-year return of 150% and a 3-year return of 200%. However, the stock has experienced some short-term volatility, with a maximum drawdown of 66.34% in Q4 2022.
- NVDA has consistently outperformed both AMD and TSM over the past three years, demonstrating strong growth and market leadership. This outperformance is particularly evident in the longer-term periods, such as the 2-year and 3-year returns. While NVDA has experienced some short-term underperformance, its overall performance has been consistently strong.
- NVDA has consistently outperformed XLK over all the periods analyzed, demonstrating a strong performance relative to the broader technology sector. This outperformance has been particularly significant in the longer-term periods, indicating a strong growth trajectory for NVDA.
Future Outlook:
- NVIDIA's management provided Q4 FY25 revenue guidance of $37.5 billion, plus or minus 2%. This guidance incorporates continued demand for Hopper and the initial ramp of Blackwell, with expectations to exceed previous Blackwell revenue estimates. Gaming revenue is expected to decline sequentially due to supply constraints. GAAP and non-GAAP gross margins are expected to be 73% and 73.5%, respectively, plus or minus 50 basis points. Operating expenses are expected to remain elevated due to ongoing investments. The company acknowledges that demand greatly exceeds supply for Blackwell.
- Analysts remain largely bullish on NVIDIA's long-term prospects, with a consensus price target of $160. The company's strong fundamentals, high growth potential, and dominant market position in the AI market support this bullish outlook. However, investors should be aware of the potential for a market correction if growth slows or investor sentiment shifts.
Summary:
- NVIDIA is a leading provider of accelerated computing platforms and solutions, with a strong financial performance, high growth potential, and a dominant market position in the AI market. The company's revenue growth is exceptionally strong, driven by the rapid adoption of AI and accelerated computing. NVIDIA is highly profitable, with strong gross margins, operating margins, and net margins. The company has a very strong liquidity position, with ample cash reserves and a high current ratio. NVIDIA has a very low level of debt, as evidenced by its low debt-to-equity ratio and debt-to-EBITDA ratio. The company's strong cash flow generation further supports its solvency position. NVIDIA is highly efficient in its operations, as evidenced by its high return on assets, return on equity, and return on invested capital. The company's strong cash flow generation and low debt levels further support its efficiency in utilizing its resources.
- NVIDIA's strengths include its strong financial performance, high growth potential, dominant market position in the AI market, and efficient operations. However, the company faces several weaknesses, including supply chain challenges, competition, and high valuation multiples. NVIDIA has several opportunities for growth, including expansion into enterprise and industrial AI, geographic expansion, and continued investment in R&D. The company also faces several threats, including geopolitical risks, potential market corrections, and increasing competition.
- NVIDIA's overall financial health is strong, with a high level of liquidity, low debt levels, and strong cash flow generation. The company's growth potential is significant, driven by the continued expansion of the AI market and its own investments in new products and technologies. However, investors should be aware of the potential for a market correction if growth slows or investor sentiment shifts.
- Key factors for future performance include the continued growth of the AI market, the successful ramp of the Blackwell GPU architecture, and the company's ability to manage supply chain challenges and competition. Investors should monitor these factors closely to assess the potential impact on NVIDIA's future performance.
- Areas requiring further monitoring include the company's valuation, the sustainability of its growth trajectory, and the impact of geopolitical risks on its business. Investors should also monitor the company's progress on its strategic initiatives, including its expansion into enterprise and industrial AI and its investments in sovereign AI initiatives globally.
- NVIDIA's investment profile is characterized by high growth potential, strong financial performance, and a dominant market position in the AI market. However, the company also carries a higher level of risk, as evidenced by its high valuation multiples, supply chain challenges, and competition. Investors should carefully consider their risk tolerance and investment objectives before investing in NVIDIA.

Price history

Fundamentals

Insights

NVIDIA is a leading provider of accelerated computing platforms and solutions, with a focus on data centers, gaming, professional visualization, and automotive markets.
The company is experiencing robust demand for its data center products, particularly its new Hopper GPU architecture, driven by the rapid growth of AI and generative AI applications.
However, NVIDIA faces significant supply chain challenges and risks due to semiconductor industry constraints, extended lead times, and complex global trade regulations, especially export controls targeting China.
The company's financial performance has been strong, with high revenue growth and profitability, but gross margins have been impacted by inventory provisions and product mix shifts.
NVIDIA continues to invest heavily in R&D and new product development to maintain its technology leadership, while also returning capital to shareholders through share repurchases.
Key risks include the ability to accurately forecast demand, manage a complex global supply chain, navigate evolving trade restrictions, and mitigate legal/regulatory risks and cybersecurity threats.
The company's future outlook is positive, driven by the continued growth of the AI market and the company's strong financial position.
The company's new Blackwell GPU architecture is expected to drive significant growth in the data center segment.
The company's expansion into enterprise and industrial AI presents significant growth opportunities.
The company's strong cash flow generation will support debt repayment, dividend growth, and investments in organic growth opportunities.

Analysis

Revenue - NVIDIA's revenue growth is exceptionally strong, driven by the rapid adoption of AI and accelerated computing. - The company's data center segment is a major driver of revenue growth, fueled by the strong demand for its high-performance GPUs. - The company's new Hopper GPU architecture is experiencing the fastest product ramp in its history, contributing significantly to revenue growth. - The company's gaming segment is also performing well, benefiting from strong back-to-school sales and healthy channel inventory.
- Profitability
  - NVIDIA is highly profitable, with strong gross margins, operating margins, and net margins.
  - The company's profitability is driven by its strong revenue growth, efficient expense management, and high-margin products.
  - The company's profitability ratios are significantly above the industry average, highlighting its efficient use of resources to generate profits.
- Liquidity
  - NVIDIA has a very strong liquidity position, with ample cash reserves and a high current ratio.
  - The company's strong operating cash flow further supports its liquidity position.
  - This strong liquidity position indicates a strong ability to meet short-term obligations and navigate potential economic downturns.
- Solvency
  - NVIDIA has a very low level of debt, as evidenced by its low debt-to-equity ratio and debt-to-EBITDA ratio.
  - The company's strong cash flow generation further supports its solvency position.
  - The company's low debt levels and strong cash flow generation suggest a high level of long-term solvency and financial stability.
- Operational Efficiency
  - NVIDIA is highly efficient in its operations, as evidenced by its high return on assets, return on equity, and return on invested capital.
  - The company's strong cash flow generation and low debt levels further support its efficiency in utilizing its resources.
- Cash Flow Analysis
  - NVIDIA generates significant cash flow from its operations, which is supporting its investments in growth and shareholder returns.
  - The company is investing heavily in capital expenditures, reflecting its commitment to growth and innovation.
  - The company is returning capital to shareholders through dividends and share repurchases, while also utilizing debt financing to support its growth.
- Risk Factors
  - The company faces significant supply chain challenges and risks due to semiconductor industry constraints, extended lead times, and complex global trade regulations, especially export controls targeting China.
  - The company's reliance on third-party suppliers and long manufacturing lead times creates supply chain vulnerabilities.
  - The company is exposed to complex and evolving global trade regulations, export controls, and geopolitical tensions.
  - The company faces competition from larger, diversified competitors and new market entrants.
  - The company is subject to cybersecurity breaches and data protection/privacy compliance risks.
- Future Outlook
  - NVIDIA's future outlook is positive, driven by the continued growth of the AI market and the company's strong financial position.
  - The company's new Blackwell GPU architecture is expected to drive significant growth in the data center segment.
  - The company's expansion into enterprise and industrial AI presents significant growth opportunities.
  - The company's strong cash flow generation will support debt repayment, dividend growth, and investments in organic growth opportunities.

Financial statements

Public filings

NVIDIA is a leading provider of accelerated computing platforms and solutions, with a focus on data centers, gaming, professional visualization, and automotive markets
The company is experiencing robust demand for its data center products, particularly its new Hopper GPU architecture, driven by the rapid growth of AI and generative AI applications
However, NVIDIA faces significant supply chain challenges and risks due to semiconductor industry constraints, extended lead times, and complex global trade regulations, especially export controls targeting China
The company's financial performance has been strong, with high revenue growth and profitability, but gross margins have been impacted by inventory provisions and product mix shifts
NVIDIA continues to invest heavily in R&D and new product development to maintain its technology leadership, while also returning capital to shareholders through share repurchases
Key risks include the ability to accurately forecast demand, manage a complex global supply chain, navigate evolving trade restrictions, and mitigate legal/regulatory risks and cybersecurity threats

Core Business and Operations:

NVIDIA is a technology company that pioneered accelerated computing to help solve complex computational problems
The company operates in two main segments: Compute & Networking (data center, automotive, robotics) and Graphics (gaming, professional visualization)
NVIDIA's platforms incorporate processors, interconnects, software, algorithms, systems and services to deliver value across its target markets
Major customers include public cloud providers, consumer internet companies, enterprises, startups, OEMs, ODMs, system integrators, and distributors
Key competitors include AMD, Intel, Huawei, Qualcomm, and companies with internal chip design capabilities

Industry and Market Trends:

Rapid advancements in accelerated computing, AI, and generative AI models are driving increased demand for NVIDIA's data center products
Geopolitical tensions and export control restrictions, particularly related to China, pose significant risks and challenges for NVIDIA's global supply chain and market access
Semiconductor industry is experiencing supply chain constraints, extended lead times, and uncertainty around component availability
Regulatory scrutiny of AI technologies and their responsible use is increasing, which could lead to new compliance requirements

Recent Events:

Introduced new data center GPU architectures (Hopper, Blackwell) to meet growing demand for AI and accelerated computing
Expanded data center product portfolio to offer solutions not subject to export control restrictions
Experienced supply constraints and production yield issues with Blackwell GPU, impacting gross margins
Continued to invest heavily in R&D and engineering for new product development

Risk Factors:

Failure to accurately estimate customer demand leading to supply/demand mismatches and inventory issues
Reliance on third-party suppliers and long manufacturing lead times creating supply chain vulnerabilities
Exposure to complex and evolving global trade regulations, export controls, and geopolitical tensions
Potential for product defects, quality issues, and warranty/liability claims
Competition from larger, diversified competitors and new market entrants
Cybersecurity breaches and data protection/privacy compliance risks

Legal Matters:

Ongoing securities class action lawsuit related to alleged false/misleading statements about channel inventory and cryptocurrency mining impact
Derivative lawsuits related to the securities class action, alleging breach of fiduciary duty and other claims
No material accrued contingent liabilities associated with legal proceedings as of the latest reporting period

Management's Discussion and Analysis:

Revenue growth driven by strong demand for data center compute and networking products, particularly Hopper architecture
Gross margins impacted by inventory provisions, product mix shifts, and supply chain constraints
Operating expenses increased significantly due to higher compensation, benefits, and engineering costs
Substantial cash flow from operations and continued share repurchase program to offset dilution
Liquidity position remains strong with $38.5 billion in cash, cash equivalents and marketable securities

Earnings calls

Earnings Report 2025Q3 (2024-11-20)

Key takeaways

Exceptional Data Center Growth: NVIDIA's Data Center business continues to be a significant driver of revenue growth, fueled by strong demand for its high-performance GPUs and the expansion of AI workloads.
Blackwell's Strategic Importance: The successful ramp of the Blackwell platform is crucial for NVIDIA's continued growth and maintaining its leadership position in the rapidly evolving AI market. However, margin pressure is expected in the near term.
Supply Chain Challenges: While demand significantly exceeds supply, NVIDIA is actively working to address supply chain constraints to meet the growing demand for its products.
AI Market Expansion: The expansion into enterprise and industrial AI presents significant growth opportunities for NVIDIA, leveraging its existing strengths and expanding into new market segments.
Geopolitical Risks: The evolving geopolitical landscape, particularly the US-China relationship, presents both opportunities and risks for NVIDIA's business.
Inference Market Potential: The inference market is expected to experience significant growth, driven by the increasing adoption of AI across various industries and applications.
Long-Term Growth Outlook: NVIDIA's long-term growth prospects remain strong, driven by the ongoing platform shift from traditional computing to AI and the continued expansion of the AI market.

Focus of management’s prepared remarks

Record Q3 Results: Revenue of $35.1B, exceeding guidance, with strong growth across all market platforms driven by accelerated computing and AI adoption.
Data Center Dominance: Record Data Center revenue of $30.8B, fueled by exceptional H200 demand and significant CSP growth (revenue more than doubled YoY). H200 is highlighted as the fastest product ramp in company history.
Blackwell Ramp: Blackwell is in full production, with shipments exceeding initial estimates. Demand is described as "staggering," and the company is working to scale supply. Blackwell is positioned as a full-stack, customizable AI infrastructure solution.
Software Growth: Software, service, and support revenue is annualizing at $1.5B, with expectations to exceed $2B by year-end.
AI Market Expansion: Focus on Enterprise AI and Industrial AI, highlighting NVIDIA AI Enterprise and Omniverse as key platforms. Growth in AI-native startups and the potential for billions of AI agents are emphasized.
Global Expansion: Significant progress in sovereign AI initiatives in India and Japan, with partnerships with leading CSPs and enterprises.
Gaming Performance: Strong Q3 gaming results driven by back-to-school sales and healthy channel inventory. New GeForce RTX AI PCs are being shipped.
Automotive Growth: Record automotive revenue driven by Orin and strong end-market demand.
Financial Guidance: Q4 revenue guidance of $37.5B (+/- 2%), reflecting continued Hopper demand and Blackwell ramp. Gross margin guidance anticipates moderation to the low 70s initially, with a return to the mid-70s expected upon full Blackwell ramp.

Focus of the analyst Q&A

Large Language Model Scaling: Questions regarding whether scaling for large language models has stalled, and how NVIDIA is assisting customers in addressing potential challenges. The impact of clusters yet to benefit from Blackwell on demand was also raised.
Blackwell Execution and Roadmap: Concerns about reported heating issues and their potential impact on the execution of NVIDIA's roadmap, including the Ultra product launch and the transition to the next generation of GPUs. Questions regarding the ability to meet the planned timeline were raised.
Blackwell Ramp Trajectory: Analysts sought clarification on the timing of Blackwell surpassing Hopper in revenue, and the impact of Blackwell's ramp on gross margins. Specific questions were asked about the timing of margin pressure and the potential for recovery.
Gross Margin Trajectory: Analysts sought clarification on the company's expectation for gross margin recovery to the mid-70s, specifically questioning the timeframe for this recovery.
Inference Market Growth: Questions about the growth trajectory of the inference market relative to training, and the potential for utilizing existing Hopper chips for inference as clusters age.
Networking Business Performance: Analysts sought to understand the reasons behind the sequential decline in networking revenue, despite strong demand, and the outlook for Spectrum-X's growth.
Sovereign AI Demand: Analysts requested an update on the previously mentioned sovereign AI demand in the low double-digit billions.
Gaming Supply Constraints: Analysts inquired about the reasons for supply constraints in the gaming segment, specifically whether this was due to shifting supply towards the data center.
Sequential Growth Trajectory: Analysts sought clarification on the expected pace of sequential revenue growth beyond Q4, particularly in light of the Blackwell ramp.
US-China Relations and Tariffs: Analysts asked about the potential impact of the upcoming US administration change and the ongoing situation in China on NVIDIA's business, particularly regarding tariffs.
AI Compute Allocation: Analysts sought a high-level understanding of the typical allocation of compute resources across pre-training, reinforcement learning, and inference within the AI ecosystem.

Summary

Financial Performance

NVIDIA reported record Q3 FY25 revenue of $35.1 billion, exceeding its guidance of $32.5 billion. This represents a 17% sequential increase and a substantial 94% year-over-year growth. Data Center revenue reached a record $30.8 billion, up 17% sequentially and 112% year-over-year. Gaming revenue was $3.3 billion, up 14% sequentially and 15% year-over-year. Professional Visualization (ProViz) revenue reached $486 million, a 7% sequential and 17% year-over-year increase. Automotive revenue hit a record $449 million, up 30% sequentially and 72% year-over-year. GAAP gross margin was 74.6%, while non-GAAP gross margin was 75%, slightly down sequentially due to a mix shift towards more complex, higher-cost Data Center systems. Operating expenses increased sequentially due to higher compute, infrastructure, and engineering development costs. The company returned $11.2 billion to shareholders through share repurchases and dividends.

Revenue Drivers

The primary revenue driver was the exceptional demand for NVIDIA's Data Center products, particularly the H200 GPU, which experienced the fastest product ramp in the company's history. Cloud service providers (CSPs) contributed significantly to this growth, with revenue more than doubling year-over-year. The strong growth in consumer internet revenue, more than doubling year-over-year, further fueled Data Center performance. In Gaming, strong back-to-school sales and healthy channel inventory contributed to sequential and year-over-year growth. The ProViz segment benefited from continued demand for RTX workstations and the emerging demand driven by AI applications. Automotive revenue growth was driven by the ramp of NVIDIA Orin and strong demand for in-vehicle infotainment (IVI) systems.

Profit Margins and Cost Management

Gross margins decreased slightly sequentially due to the mix shift towards higher-cost Data Center systems. The company anticipates gross margins to moderate to the low 70s as the Blackwell product ramps, with an expectation of reaching the mid-70s once fully ramped. Operating expenses increased sequentially due to investments in compute, infrastructure, and new product development. The company expects these investments to continue as it scales its data center infrastructure for AI development and new product introductions.

Guidance and Outlook

NVIDIA provided Q4 FY25 revenue guidance of $37.5 billion, plus or minus 2%. This guidance incorporates continued demand for Hopper and the initial ramp of Blackwell, with expectations to exceed previous Blackwell revenue estimates. Gaming revenue is expected to decline sequentially due to supply constraints. GAAP and non-GAAP gross margins are expected to be 73% and 73.5%, respectively, plus or minus 50 basis points. Operating expenses are expected to remain elevated due to ongoing investments. The company acknowledges that demand greatly exceeds supply for Blackwell.

Strategic Initiatives

Key strategic initiatives include the continued development and ramp of the Blackwell platform, expansion into the enterprise and industrial AI markets with NVIDIA AI Enterprise and Omniverse, and growth in sovereign AI initiatives globally. The company is actively collaborating with major CSPs, enterprises, and governments to deploy its AI infrastructure at scale. The focus on software, services, and support is evident in the projected annualized revenue growth in this segment.

Management Commentary

Management expressed strong confidence in the continued growth of the AI market and NVIDIA's position within it. They highlighted the ongoing scaling of large language models, the emergence of new scaling techniques (post-training and inference time scaling), and the significant opportunities in enterprise and industrial AI. The company emphasized its full-stack approach and its ability to deliver customizable AI infrastructure to meet diverse customer needs. While acknowledging supply chain challenges, management expressed confidence in its ability to ramp production and meet the strong demand for its products.

Industry and Market Conditions

NVIDIA views the AI market as experiencing a fundamental shift from traditional coding to machine learning, creating a massive opportunity for modernization of existing data centers. The company sees the emergence of generative AI as a new industry, creating AI factories that generate digital intelligence. Management anticipates this growth to continue for several years. The company acknowledges the competitive landscape, particularly in China, and its commitment to complying with export controls.

News evaluation

Sentiment rating:Slightly Positive

Nov 24, 2024

Summary

NVIDIA's Q3 earnings report showcased impressive results, with record revenue of $35.1 billion, a 94% year-over-year increase, and adjusted EPS of $0.81, exceeding the consensus estimate of $0.75. This strong performance, driven largely by the data center segment's 112% year-over-year growth, further solidified NVIDIA's position as a market leader. The company's inclusion in the Dow Jones Industrial Average on November 8th also reflects investor confidence. However, the stock's post-earnings decline highlights concerns about valuation and the sustainability of such rapid growth. Analysts remain largely bullish, but caution is warranted given the high expectations and potential for market corrections. The strong demand for Blackwell chips, with a 12-month backlog, suggests a positive outlook, but concerns about supply chain constraints and increasing competition remain. Despite these challenges, NVIDIA's strong fundamentals and innovative product pipeline suggest a positive long-term outlook.

Key takeways

NVIDIA reported record-breaking Q3 2024 revenue of $35.1 billion, exceeding expectations, driven by strong demand for AI chips, particularly in the data center segment. This demonstrates the company's continued dominance in the AI market and its ability to capitalize on the growing demand for AI-related technologies. However, the stock price experienced a post-earnings decline, highlighting the high expectations placed on the company.
Despite the strong Q3 results, concerns remain about the sustainability of NVIDIA's growth trajectory. High valuations, increasing competition, and potential market corrections pose significant risks. Investors should carefully consider these factors when assessing the company's long-term prospects.
The upcoming Blackwell architecture is expected to be a major revenue driver for NVIDIA, but potential supply chain constraints and overheating issues could impact its success. The company's ability to manage these challenges will be crucial for maintaining its growth momentum. Analysts remain largely bullish on the long-term prospects of the Blackwell chips.
NVIDIA's inclusion in the Dow Jones Industrial Average reflects its market leadership and growth potential, attracting more institutional investors. However, this inclusion also increases the scrutiny on the company's performance and could lead to increased volatility. The company's ability to meet high market expectations will be crucial for maintaining its positive momentum.
While analysts remain largely bullish on NVIDIA's long-term prospects, concerns about valuation, competition, and geopolitical risks warrant caution. Investors should carefully assess these factors and consider a balanced approach, focusing on both the company's strong fundamentals and the potential challenges ahead. The upcoming earnings reports will be crucial in shaping investor sentiment.

News

NVIDIA's Q3 2024 earnings report revealed record-breaking revenue of $35.1 billion, a 94% year-over-year increase, exceeding analyst expectations. Data Center revenue alone reached a record $30.8 billion, representing a 112% year-over-year surge. The company also provided strong guidance for Q4 2025, forecasting revenue of $37.5 billion.
Nvidia's Q2 fiscal 2025 revenue reached $30 billion, a 122% year-over-year increase, driven by strong demand for AI chips. This represents a significant milestone for the company, highlighting its dominance in the AI market. The data center segment contributed significantly to this growth.
Nvidia's market capitalization briefly surpassed Apple's, reaching $3.53 trillion, reflecting investor confidence in the company's growth trajectory. This milestone underscores NVIDIA's significant market value and its position as a leading technology company. The company's stock price has also seen substantial gains year-to-date.
Nvidia's stock has experienced remarkable growth, increasing by approximately 200% year-to-date. This significant surge reflects investor confidence in the company's strong financial performance and its leading role in the AI revolution. The stock's performance has outpaced major market indices.
Nvidia's Blackwell architecture is expected to generate significant revenue, with a 12-month backlog of orders. The chip's advanced capabilities and high demand are key drivers of the company's growth projections. Analysts predict billions of dollars in revenue from Blackwell sales.

Analysis

Analysts overwhelmingly rate NVIDIA a 'buy' or 'strong buy,' reflecting strong confidence in the company's future prospects. The consensus among experts points to continued growth driven by the AI boom and NVIDIA's dominant market position. However, some analysts express caution regarding valuation and potential market corrections.
Concerns about Nvidia's valuation are prevalent, with some analysts suggesting the stock is overvalued given its current price. The high P/E ratio and price-to-sales ratio raise questions about the sustainability of its growth trajectory. However, other analysts argue that the valuation is justified given the company's strong fundamentals and growth potential.
Despite the strong financial performance, concerns about increasing competition are emerging. Companies are developing their own AI chips, potentially impacting NVIDIA's market share and pricing power. This increased competition could lead to a slowdown in revenue growth in the future.
The upcoming Blackwell architecture is expected to be a significant catalyst for future growth. Analysts project billions of dollars in revenue from Blackwell sales, which could significantly boost NVIDIA's overall performance. However, concerns about potential overheating issues and supply chain constraints could impact the chip's success.
NVIDIA's strong cash flow generation and high EBITDA margins are positive indicators of its financial health. These metrics suggest the company has the resources to invest in research and development, expand its operations, and return value to shareholders. However, the company's focus on growth over dividends may not appeal to all investors.
Insider selling has raised concerns among some investors, although some sales were pre-planned. The significant volume of insider selling, however, could indicate a lack of confidence in the company's future growth. This raises questions about the sustainability of the current growth trajectory.
Geopolitical factors, such as trade tensions with China and potential export restrictions, pose significant risks to NVIDIA's business. These external factors could impact the company's supply chain, manufacturing capabilities, and sales in key markets. The company's diversification efforts aim to mitigate these risks.
Nvidia's addition to the Dow Jones Industrial Average is a significant milestone, reflecting its market leadership and growth potential. This inclusion is expected to attract more institutional investors and enhance the company's visibility. However, the Dow's composition is shifting towards growth stocks, which could lead to increased volatility.
Analysts predict continued strong revenue growth for NVIDIA, driven by increased spending on AI infrastructure. The company's dominant market position and the ongoing expansion of the AI market are expected to fuel this growth. However, concerns about a potential slowdown in growth rates and increased competition are also noted.

Trends

NVIDIA's consistent revenue growth, exceeding expectations in multiple quarters, demonstrates a strong upward trend. This growth is primarily driven by the data center segment, which continues to expand rapidly. The company's dominant market share in AI GPUs further reinforces this positive trend.
The increasing demand for AI chips is a major trend driving NVIDIA's growth. This demand is fueled by the expansion of cloud computing, the development of large language models, and the increasing adoption of AI across various industries. NVIDIA's dominant market position allows it to capitalize on this trend.
Concerns about valuation and potential market corrections are emerging as a counter-trend. The rapid growth of NVIDIA's stock price has raised concerns about overvaluation, making the stock susceptible to market downturns. This trend highlights the inherent risks associated with high-growth technology stocks.
Increasing competition from other chip manufacturers and companies developing in-house solutions is an emerging trend that could impact NVIDIA's market share. This trend highlights the need for NVIDIA to continue innovating and investing in R&D to maintain its competitive edge. The company's diversification efforts aim to mitigate this risk.

Risk factors

High valuation multiples pose a significant risk to NVIDIA's stock price. The company's high P/E ratio makes it susceptible to market corrections if investor sentiment shifts or growth slows. This risk is amplified by concerns about the sustainability of its current growth trajectory.
Increasing competition from other chip manufacturers and companies developing in-house solutions poses a significant risk to NVIDIA's market share and pricing power. This competition could lead to a slowdown in revenue growth and pressure on profit margins. NVIDIA's ability to innovate and maintain its technological leadership will be crucial in mitigating this risk.
Geopolitical factors, such as trade tensions with China and potential export restrictions, pose significant risks to NVIDIA's supply chain and revenue streams. These external factors could disrupt manufacturing, limit sales in key markets, and impact the company's overall financial performance. NVIDIA's diversification efforts aim to mitigate these risks.
Concerns about the sustainability of high growth rates and the potential for a market correction in the AI sector represent a significant risk. The rapid growth of NVIDIA's stock price and the speculative nature of the AI industry make it vulnerable to downturns if investor sentiment shifts. This risk highlights the importance of managing expectations and navigating market volatility.
Revenue concentration risk is a concern, as a small number of customers account for a significant portion of NVIDIA's revenue. This dependence on a few key clients makes the company vulnerable to changes in their spending patterns or potential disruptions in their businesses. Diversification strategies are crucial to mitigate this risk.

Comparative analysis

Benchmarks (as of 2024-11-18)

Technology Select Sector SPDR Fund (XLK)

Performance Comparison:
- NVDA has consistently outperformed XLK over all the periods analyzed, demonstrating a strong performance relative to the broader technology sector. This outperformance has been particularly significant in the longer-term periods, indicating a strong growth trajectory for NVDA.
Risk and Return Analysis:
- NVDA has provided significantly higher annualized returns than XLK over all the periods analyzed. This suggests that NVDA has been a strong performer in terms of generating returns for investors.
- NVDA has also exhibited higher annualized volatility than XLK, indicating that NVDA's price movements are more volatile than the broader technology sector. This suggests that NVDA carries a higher level of risk compared to XLK.
- NVDA's maximum drawdown of 66.34% in Q4 2022 is significantly higher than XLK's maximum drawdown of 33.56% in Q3 2022. This indicates that NVDA is more susceptible to significant price declines than XLK, further highlighting its higher risk profile.
Risk-Adjusted Performance:
- NVDA's Sharpe Ratio has generally been higher than XLK's, suggesting that NVDA has offered a better risk-adjusted return over the period. This indicates that NVDA has been able to generate higher returns for investors while taking on a higher level of risk.
- NVDA's beta value has consistently been higher than XLK's, indicating that NVDA is more sensitive to market movements than XLK. This suggests that NVDA's price is likely to fluctuate more dramatically in response to market changes, further highlighting its higher risk profile.
Overall Assessment:
- NVDA has demonstrated strong performance and growth potential, consistently outperforming XLK over all the periods analyzed. However, it also carries a higher level of risk, as evidenced by its higher volatility, maximum drawdown, and beta. Investors should carefully consider their risk tolerance and investment objectives before investing in NVDA.
- NVDA's recent trends suggest that its volatility and sensitivity to market movements have been increasing. This could be attributed to factors such as the ongoing global economic uncertainty, the competitive landscape in the semiconductor industry, and the company's own growth initiatives. Investors should monitor these trends closely to assess the potential impact on NVDA's future performance.

Peers Price History(as of 2024-11-18)

Advanced Micro Devices, Inc. (AMD)Taiwan Semiconductor Manufacturing Co., Ltd. (TSM)

Performance Comparison: NVDA has consistently outperformed both AMD and TSM over the past three years, demonstrating strong growth and market leadership. This outperformance is particularly evident in the longer-term periods, such as the 2-year and 3-year returns. While NVDA has experienced some short-term underperformance, its overall performance has been consistently strong.
Risk and Return Analysis: NVDA has provided higher annualized returns than both AMD and TSM over the past three years. However, this higher return comes with a higher level of risk, as evidenced by NVDA's consistently higher annualized volatility. NVDA's maximum drawdown has also been the largest among the three companies, indicating that it is more susceptible to significant price declines.
Risk-Adjusted Performance: Despite its higher risk, NVDA has consistently offered a better risk-adjusted return than AMD and TSM, as indicated by its higher Sharpe ratio. This suggests that NVDA's higher returns have outweighed its higher risk. NVDA's higher beta value indicates that it is more sensitive to market movements than its peers, further highlighting its higher risk profile.
Overall Assessment: NVDA has been a strong performer in the semiconductor industry, demonstrating consistent growth and market leadership. However, this performance comes with a higher level of risk compared to its peers. NVDA's higher volatility and maximum drawdown suggest that investors should be aware of the potential for significant price declines. Despite this risk, NVDA's higher Sharpe ratio indicates that its higher returns have outweighed its higher risk. Investors seeking high growth potential should consider NVDA, but they should also be prepared for higher volatility and potential drawdowns.

Peers Fundamentals(as of 2024-10-31)

Advanced Micro Devices, Inc. (AMD)Taiwan Semiconductor Manufacturing Co., Ltd. (TSM)

Market Position and Size:
- NVDA is a dominant player in the semiconductor industry, with a market capitalization significantly larger than its peers, AMD and TSM.
- NVDA's market cap is 3251844.0 greater than AMD and 2490626.0 greater than TSM.
- NVDA consistently outperforms its peers in terms of revenue, EBITDA, and net income, justifying its larger market cap.
Profitability and Efficiency:
- NVDA exhibits significantly higher profitability compared to its peers and industry averages, with strong gross profit margins, EBITDA margins, and net profit margins.
- NVDA demonstrates exceptional efficiency in generating returns on its assets, equity, and capital, significantly outperforming its peers and industry averages.
- Despite its large market cap and substantial revenue, NVDA maintains a high level of profitability, indicating efficient operations and strong pricing power.
Financial Health and Stability:
- NVDA exhibits strong liquidity and a conservative debt position compared to its peers and industry averages, with high current and quick ratios and low debt levels.
- NVDA's strong liquidity and low debt levels provide financial flexibility and stability, supporting its growth and investment strategies.
Valuation and Market Perception:
- NVDA's valuation metrics are generally higher than its peers and industry averages, reflecting its strong financial performance and growth prospects.
- NVDA's high valuation multiples could make it vulnerable to market corrections or changes in investor sentiment.
Cash Flow and Capital Management:
- NVDA demonstrates strong cash flow generation capabilities, exceeding its peers in terms of net operating cash flow, free cash flow, and cash flow per market cap.
- NVDA's ability to consistently generate substantial free cash flow demonstrates its strong operational efficiency and effective capital allocation strategies.
Growth and Future Prospects:
- NVDA exhibits strong and consistent growth across various metrics, outperforming its peers in most areas.
- NVDA's 5-year CAGR for sales is 62.43%, significantly higher than AMD's 32.17% and TSM's 19.75%, and surpasses the peer group average of 38.12%.
- NVDA's growth profile is balanced across different metrics, with strong growth in both revenue and profitability, indicating a healthy and sustainable growth trajectory.
Potential for Investment:
- NVDA presents an attractive investment opportunity, considering its strong financial performance, growth potential, and dominant market position.
- NVDA's high profitability, exceptional efficiency, robust cash flow generation, and conservative debt position make it a financially sound company.
- NVDA's growth prospects are promising, with continued expansion in high-growth markets such as artificial intelligence, gaming, and data centers.
Key Risks and Considerations:
- NVDA's premium valuation could make it vulnerable to market corrections or changes in investor sentiment.
- NVDA's growth rates have exhibited some fluctuations in recent years, which could continue in the future.
Overall Assessment:
- NVDA exhibits strong overall financial health and performance, exceeding its peers and industry averages in most areas.
- NVDA's strong financial position, growth potential, and dominant market position make it a compelling investment opportunity, although investors should carefully consider its premium valuation and potential growth volatility.