Chipmaker Nvidia (NVDA) is considered by many as a top long-term investment due to its impressive profit margins. Indeed, investor Louis Navellier, founder of Navellier & Associates, told Yahoo Finance that Nvidia’s operating margins are exceptionally high compared to other companies. And for Navellier, who has been holding Nvidia for his clients since May 2019, it is hard to sell the stock because he believes the company’s “margin expansion creates a lot of earnings surprises,” which has led to many upward revisions in the past.
In addition, Nvidia’s dominance in the chip market has allowed the firm to charge premium prices for its products, especially for its AI chips. As a result, Nvidia’s operating profit margins have increased from 39.9% in 2021 to an estimated 67.5% in 2024, and analysts expect the company to maintain similar margins in 2025 due to the growing demand for AI infrastructure.
However, the company is not without risks, and some, like David Bahnsen, CIO of The Bahnsen Group, are worried about the company’s valuation and its competitors. Indeed, Bahnsen told Yahoo Finance that Nvidia is not a monopoly and faces significant competition in the AI chip market, “but all the earnings multiple estimates are based on them never having competition.” This could be a significant problem because the tech industry is always full of surprises, and it takes only one innovative product to completely change the landscape.
Is NVDA a Good Stock to Buy?
Nevertheless, analysts remain bullish on NVDA stock overall, with a Strong Buy consensus rating based on 31 Buys and two Holds assigned in the past three months. After a 62% rally in its share price over the past year, the average NVDA price target of $179.77 per share implies an upside potential of 40.1% from current levels.
