Nvidia (NASDAQ:NVDA) is at the center of the current AI arms race, as cloud providers, hyperscalers, and enterprises scramble to capitalize on the significant productivity improvements this groundbreaking tech can potentially offer.
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No company is better positioned to capitalize on this shift than Nvidia, whose dominance is built on its leadership in producing the advanced chips that power AI innovations.
Joining the bull camp is William Blair analyst Sebastien Naji, who shares an optimistic outlook for Nvidia’s future.
“The rising AI tide has catapulted parallel computing to the forefront of the tech industry and has driven massive demand for the company’s GPUs and parallel computing stack. As evidence, Nvidia’s data center revenue grew 217% in fiscal 2024 and is expected to grow 132% in fiscal 2025, exceeding $110 billion in revenue (up dramatically from $15 billion in fiscal 2023),” Naji explained.
While Nvidia’s background in pioneering GPU-based parallel computing created the foundation for its current dominance in the AI field, as Naji points out its “technical differentiation extends beyond building state-of-the-art processors.”
That’s because Nvidia was quick to realize that achieving ongoing advancements in computing performance would require a “broader system-level approach.” It expanded its remit beyond solely being a chip designer to developing comprehensive infrastructure systems. And that has enabled the company to secure a growing portion of IT and data center spending.
Meanwhile, the combination of technical leadership and its advancement up the infrastructure stack has fueled robust gross margins and EPS growth. For instance, gross margins in fiscal 2024 have reached 74%, some distance above the 50%-60% range it historically has attained.
The good news, according to Naji, is that the strong performance is likely to continue. As Nvidia maintains its “competitive moat” spanning both hardware (such as the upcoming Rubin chips slated for next year) and software, Naji thinks the growth should be “sustainable for several years.”
As far as valuation goes, while Naji concedes that the stock trades at a premium vs. peer group median multiples, the analyst thinks its technical leadership and first-mover advantage in the GPU space, as well as its systems-level approach, justifies the valuation.
So, ultimately, what does this all mean for investors? Naji initiated coverage of Nvidia with an Outperform (i.e., Buy) rating although he has no fixed price target in mind. (To watch Naji’s track record, click here)
Naji is just one of many NVDA bulls – 39, in total – on Wall Street and with the addition of 3 Holds, the stock claims a Strong Buy consensus rating. The average target currently stands at $153.24 and offers 12-month upside of 33%. (See Nvidia stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
