NVIDIA Charts Future Growth with Innovative AI Chipsets
At its annual GTC conference on March 18, NVIDIA Corp. NVDA, a leader in generative artificial intelligence (AI) and graphical processing units (GPUs), shared its strategic plans for the future. The company emphasized its dedication to innovation and implementation in the rapidly evolving tech space.
Following strong sales of its Hopper GPUs, which surpassed 1.3 million units, NVIDIA reports that its existing Blackwell GPUs have reached over 3.6 million units sold to cloud providers. Major clients include Microsoft Corp. MSFT, Alphabet Inc. GOOGL, Meta Platforms Inc. META, and Amazon.com Inc. AMZN.
Upcoming Innovations on the Horizon
NVIDIA plans to unveil the Blackwell Ultra in the second half of 2025 and initiate shipments of the Vera Rubin in 2026. The company also announced its roadmap for the Rubin Next, which is set to launch in 2027, and Feynman AI chips in 2028.
Shift Towards Reasoning AI Models
A significant advancement in NVIDIA’s new chipsets is a transition from traditional generative AI models to reasoning AI models. This shift addresses the concerns regarding the availability of low-cost solutions from competitors like the Chinese firm DeepSeek.
Jensen Huang, NVIDIA’s CEO, noted that instead of viewing DeepSeek as a threat to its premium-priced chips, the competition presents substantial growth opportunities. Huang explained, “DeepSeek’s R1 AI model is the first open-sourced reasoning model, which consumes 100 times more computing power than non-reasoning AI models.” Other notable reasoning models include OpenAI’s o1 and Alphabet’s Gemini 2.0 Flash Thinking.
According to Huang, companies that plan to leverage reasoning AI will benefit from faster AI chips, which can optimize operational efficiency and returns. NVIDIA’s forthcoming Blackwell Ultra chips may generate up to 50 times more revenue for data centers compared to its Hopper systems, thanks to their advanced multi-user AI processing capabilities.
Expanding Opportunities in Robotics and Automotive
NVIDIA has introduced new AI infrastructure targeting robotics, positioning itself to harness growth in the automotive sector. The company’s growth in this segment has been fueled by its self-driving platforms, focusing on powering advanced driver-assistance systems (ADAS), autonomous vehicles, and robotics.
Additionally, NVIDIA launched new laptops and desktops featuring its technology, including AI-centric models such as DGX Spark and DGX Station, capable of running large AI models such as Meta’s Llama and DeepSeek’s R1.
Positive Earnings Projections for NVIDIA
NVIDIA is forecasting a revenue growth rate of 52% and an earnings growth rate of 47.2% for the current fiscal year ending in January 2026. The Zacks Consensus Estimate for current-year earnings has improved by 0.2% over the past week.
Looking ahead, NVIDIA anticipates a revenue growth rate of 22.6% and an earnings growth rate of 24.6% for the following year ending in January 2027, with the Zacks Consensus Estimate improving by 0.4% in recent days.
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Valuable Insights on NVIDIA’s Share Performance
NVIDIA boasts a return on equity (ROE) of 112.33%, significantly outperforming the S&P 500’s ROE of 16.98% and the industry’s ROE of just 6.44%. The company’s net margin is also impressive at 55.85%, compared to the industry’s margin of 8.37% and the S&P 500’s 12.65%. Its forward price-to-earnings (P/E) ratio stands at 26.74%, below the industry’s 28.33% and the S&P 500’s 18.31%.
On January 26, 2025, NVIDIA reported $43.2 billion in cash, cash equivalents, and marketable securities, up from $38.4 billion on October 27, 2024, primarily due to increased revenues offset slightly by stock repurchases. The company’s long-term debt remained stable at $8.46 billion. In the fourth quarter of fiscal 2025, NVIDIA generated $16.6 billion in operating cash flow, a rise from $11.5 billion during the same quarter the previous year.
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Investment Considerations for NVIDIA
Currently, NVIDIA holds a Zacks Rank of #2 (Buy). Year to date, the stock has declined by 10.5% and is trading at a 30.1% discount from its 52-week high. This price level suggests an attractive investment opportunity.
Brokerage firms project an average short-term price target that reflects a potential increase of 49.69% from the last closing price of $117.70, with targets ranging from $130 to $220, indicating a possible upside of 85% with negligible downside risk.
Operating in a market poised for a trillion-dollar opportunity in the next decade, NVIDIA has a long-term (3-5 years) earnings per share (EPS) growth rate of 25.7%, significantly outpacing the S&P 500’s growth rate of 12.7%.
Investing in NVIDIA presents a unique chance to support a company with remarkable execution and immense potential in the AI sector. Investors should consider entering this stock and gradually increasing their stakes during market dips. A long-term hold is advisable, as strong operational performance and promising projections are likely to enhance shareholder value, resulting in favorable stock price movements.
The performance chart below illustrates NVIDIA’s stock price trends for the year to date.
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This article originally published on Zacks Investment Research (zacks.com).
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
