Nvidia (NASDAQ:NVDA) has cemented its dominance in the data center market, consistently smashing revenue forecasts and solidifying its position at the heart of the AI revolution. As hyperscalers race to dominate the booming AI landscape, Nvidia has become one of the world’s most valuable companies.
But even Nvidia isn’t immune to market jitters. Despite delivering a strong Q4 FY 2025 – raking in $39.3 billion in revenue and a GAAP EPS of $0.89, outpacing estimates of $38.14 billion and $0.80 – the market wasn’t impressed. Investors honed in on tightening margins, while mounting concerns over trade restrictions, waning AI capital expenditures, and rising competition triggered a steep double-digit decline in Nvidia’s stock since last week’s earnings release.
However, one investor, known by the pseudonym Envision Research, argues that the selloff is misguided, as the market is overlooking Nvidia’s greatest weapon: its formidable software ecosystem, which could be the key to sustaining its competitive edge.
“The combination of Nvidia’s advanced AI chips and its software ecosystem (i.e., CUDA) can form a lock-in advantage, a scenario the market’s current EPS growth projection has not factored in yet,” asserts the 5-star investor.
Envision further details that CUDA gives developers the ability to “optimize applications” using Nvidia’s GPUs, which execute better than more general-purpose CPUs. As evidence that this is the case, the investor cites the huge influx of CUDA developers and downloads – both of which have more than doubled over the past three years.
“The success of the CUDA ecosystem is reflected in its rapid growth,” adds Envision. “With such rapid expansion, I see a realistic chance that NVDA’s combination of powerful AI chips and its software ecosystem can create a lock-in advantage.”
According to Envision, this CUDA moat will make it difficult for customers to switch to other competitors. In other words, Nvidia’s merits go beyond just the numbers on the accounting ledger, something investors would be wise to remember.
“Judging by the market response after its Q4 ER, I think the bears overlooked – and will regret – the potential of the software ecosystem,” concludes Envision Research, who rates NVDA shares a Strong Buy. (To watch Envision Research’s track record, click here)
Wall Street analysts are seeing eye-to-eye with Envision’s assessment. With 39 Buys and 3 Hold ratings, NVDA boasts a Strong Buy consensus rating. Its 12-month average price target of $178.18 implies a ~54% upside for the coming year. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.