Nvidia Stock Surges Despite Tariff Concerns and Growth Forecasts

Nvidia (NASDAQ: NVDA) has achieved significant investor gains, increasing over 1,400% in the last five years due to its strong position in the artificial intelligence (AI) market. Consistently, Nvidia has reported double to triple-digit growth in revenue, reaching record levels.

However, recent uncertainties related to import tariffs and restrictions on AI chip exports to China have raised concerns among investors. This apprehension contributed to a 29% decline in Nvidia’s stock from January to its lowest level in April.

Today, Nvidia’s stock has rebounded alongside broader market trends. Optimism regarding less severe tariffs and ongoing demand for Nvidia’s products have contributed to this recovery. Analysts predict Nvidia’s positive momentum may continue, with the stock poised for growth in 2025 driven by a key financial metric.

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Factors Behind Nvidia’s Growth

Nvidia shares have surged primarily due to its innovative graphics processing units (GPUs). Originally designed for gaming, these GPUs have expanded into various industries, most notably AI. They play a vital role in training and running large language models (LLMs), enabling complex problem-solving.

In the last fiscal year, Nvidia’s revenue soared 114% to $130 billion. This upward trend continued into the latest quarter, where revenue rose 69% to $44 billion, driven by significant demand for AI inference capabilities.

Customer Demand and Profitability

Support from major customers like Meta Platforms and Alphabet further validates Nvidia’s strong earnings. These companies remain committed to investing in AI initiatives, with Meta increasing its capital spending forecast.

Nvidia’s gross margin remains a critical indicator for investors. The gross margin has consistently exceeded 70%, hitting 71.3% in the recent quarter, despite challenges from a $1 billion charge tied to exported chips to China.

Future Gross Margin Expectations

Nvidia anticipates gross margins of 71.8% on a GAAP basis and 72% on a non-GAAP basis for the second quarter. The company expects gross margins to improve further, reaching the mid-70% range later this year.

While Nvidia faces challenges from U.S. export restrictions to China, its strong profitability track record and growing demand for its products indicate continued positive performance. Analysts remain optimistic about Nvidia’s stock soaring in 2025 due to its solid margins.

Investment Consideration for Nvidia

Before investing in Nvidia, consider that recent reports indicate the Motley Fool Stock Advisor team has identified alternative stocks with high potential returns that exclude Nvidia from their top recommendations.

Historical performance suggests strong returns; for example, investors who bought Nvidia after its recommendations in the past have seen remarkable gains.

Suzanne Frey, an executive at Alphabet, and Randi Zuckerberg, a former Facebook director, are on The Motley Fool’s board. Adria Cimino has no shares in any mentioned stock.

The views expressed are those of the author and do not necessarily reflect Nasdaq, Inc.’s opinions.