NVIDIA Stock Holds Steady as AI Investments Surge from Meta, Microsoft
Chicago, IL – May 5, 2025 – Zacks.com has released its latest insights in the Analyst Blog, featuring stocks significantly shaped by current market events. Notable stocks highlighted include NVIDIA Corp. (NVDA), Meta Platforms, Inc. (META), and Microsoft Corp. (MSFT).
Read the full highlights from Friday’s Analyst Blog:
Should You Hold NVIDIA as Meta & Microsoft Double Down on AI?
NVIDIA Corp. saw a nearly 2.5% increase on Thursday, receiving a boost from renewed enthusiasm among two of its biggest customers, Meta Platforms, Inc. and Microsoft Corp.. These tech leaders not only reaffirmed but also raised their capital expenditure commitments towards AI infrastructure.
This uptick in AI-related investments may signal a pivotal moment for NVIDIA stock, which has retreated 27% from its peak of $153.13 reached on January 7, 2025. As AI investments regain traction, investors face a dilemma: should they buy into NVIDIA, or would it be wiser to hold onto existing shares?
AI Spending Surge Could Boost Demand for NVIDIA’s Chips
During its third-quarter earnings call for fiscal 2025, Microsoft reiterated its ambitious $80 billion capital expenditure plan for AI data centers, with over half allocated to its U.S. operations.
Meanwhile, in its first-quarter earnings call, Meta Platforms raised its 2025 capital spending forecast to a range of $64-$72 billion, up from the prior $60-$65 billion. This increase is primarily focused on enhancing data center capacity and AI infrastructure, which relies heavily on NVIDIA’s high-performance graphics processing units (GPUs).
Meta’s CFO, Susan Li, indicated that this CapEx increase is driven by ambitions in AI and infrastructure upgrades. In a similar fashion, Microsoft CFO Amy Hood mentioned that investments for fiscal 2026 would rise, albeit at a more gradual pace, aligning them with immediate revenue gains, thus implying quicker AI deployment timelines.
These commitments highlight the ongoing demand for NVIDIA’s chips, particularly its H100 and forthcoming B100 GPUs, as hyperscalers expand their AI platforms.
AI Boom Propelling NVIDIA’s Financial Growth
NVIDIA’s products are at the forefront of the AI shift, attracting demand from hyperscalers, enterprises, and innovative startups. The data center segment remains a crucial revenue driver. In the fourth quarter of fiscal 2025, data center revenues soared 93% year over year to $35.58 billion, accounting for 90.5% of total sales.
The growth of AI workloads, cloud computing expansion, and greater enterprise adoption of AI models have made NVIDIA’s chips essential. Businesses are increasingly investing in AI infrastructure, ensuring NVIDIA’s central role in this technological evolution.
Financially, NVIDIA is performing well. In its fourth quarter of fiscal 2025, revenues surged 78% year over year, while non-GAAP EPS increased by 71%. The company’s forecast for first-quarter fiscal 2026 suggests revenues could reach $43 billion, a significant rise from $26.04 billion in the same quarter the previous year.
Analysts anticipate NVIDIA will sustain this positive trajectory, predicting revenue growth of 48% for fiscal 2026 and 24% for fiscal 2027. Earnings are expected to jump by 42% in fiscal 2026 and 27% in fiscal 2027, underscoring NVIDIA’s long-term investment appeal. The company’s earnings have exceeded Zacks Consensus Estimates in the last four quarters, averaging a surprise of 7.9%.
Concerns About NVIDIA’s Valuation
In terms of valuation, however, NVIDIA appears overvalued, reflected in its Zacks Value Score of D.
Currently, NVDA shares are trading at a forward 12-month Price/Sales ratio of 13.32X, surpassing the Zacks Semiconductor – General industry average of 10.96X.
Conclusion: Hold NVDA Stock for Now
While NVIDIA’s stock has retreated from its highs, the ongoing AI megatrend continues to gain momentum, underpinned by substantial investments from Meta Platforms and Microsoft. Their financial commitment to AI infrastructure emphasizes NVIDIA’s critical role in the fast-evolving tech environment. However, its elevated valuation may expose it to short-term fluctuations. At this juncture, maintaining existing NVIDIA positions appears to be the prudent course of action.
Presently, NVIDIA holds a Zacks Rank #3 (Hold).
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