Nvidia (NASDAQ:NVDA) became the poster boy of the artificial intelligence (AI) revolution. Its high-performance graphics processing units (GPUs) have played an instrumental role in training large language models. Thus, when the world tried to mimic or adopt the generative AI model of ChatGPT, they placed their order for Nvidia’s data centre GPUs. With sales doubling and tripling for a high-margin product, Nvidia’s stock rallied 944% between November 4, 2022, and November 8, 2024.
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Nvidia’s 940% rally in two years backed by fundamentals
In the first full year of the AI data centre rally, Nvidia’s Data Center (DC) revenue jumped 217% to US$47.5 billion, accounting for 78% of the company’s fiscal 2024 revenue, from 56% a year ago. Its gross margin jumped from 59.2% in fiscal 2023 to 73.8% in fiscal 2024. These numbers continued to grow in fiscal 2025. Data centre revenue rose to US$79.6 billion in the first nine months of fiscal 2025, 67.5% above fiscal 2024 DC revenue.
Such high numbers justify Nvidia’s high valuations. At around US$140 a share, the stock is priced at 34 times its sales per share and 62 times its earnings per share.
Many hedge fund managers sold a portion of their Nvidia holdings in January when China’s DeepSeek wave hit data centre stocks. For a year, Nvidia’s valuations have been questioned. Given that almost 80% of the company’s revenue comes from the data centre market, the concentration risk increased. Hence, even a small scare can send ripple effects and encourage investors to sell the stock and book profits.
Nvidia’s stock fell 20% in late January and early February 2025 as investors booked profits. When the fears subsided and AI investment poured in from all over the world, Nvidia’s stock price trend reversed.
Opinion: Nvidia stock is still a buy
Nvidia doesn’t just provide GPUs but entire computing platforms that include processors, interconnects, software, algorithms, systems, and services. Technology keeps evolving. We are in the age of GPU computing. While it is true that Nvidia’s too-big-to-be-true rally is over, growth will normalize with Advanced Micro Devices launching close and cost-effective substitutes. However, Nvidia’s share price still has room for 20–30% annual growth as it has launched its next-generation Blackwell architecture.
The AI Action Summit in Paris on February 10 and 11 saw a US$209.2 billion investment in AI infrastructure from the European Commission. Why look so far? America has a US$320 billion investment lined up for AI infrastructure in 2025 from tech giants Meta, Amazon, Alphabet, and Microsoft. Then there is sovereign AI. Only Nvidia and AMD GPUs offer full-stack high-performance GPU computing AI needs.
Looking into the future, the AI revolution doesn’t end at data centre loads. The advent of 5G has made AI at the edge possible. This means there will be a need for AI-level compute load in edge devices like robots, cameras, traffic signals, and more. And this opportunity will bring high volumes. Generative AI is just one form of AI. It converts voice, vision, and text into computer language and responds like a human. As AI capabilities are enhanced, computing needs will also be enhanced.
Intel rallied for almost 30 years from the 80s to 2018 on CPU computing. We are in the GPU computing age and various form factors will be introduced. The data centre form, PC form, embedded device form, mobile form – and Nvidia could monetize on that.
Investor takeaway
Many big companies like Amazon and Apple faced several hiccups and downturns when even their biggest shareholders sold their shares. Had they trusted the company’s ability to scale the technology, they would be sitting on a portfolio worth billions of dollars. Nvidia is such a stock as it has an edge in technology and sound management that supports innovation.
While you can consider booking profits every now and then on a portion of your Nvidia holdings, keep buying its shares on every dip. This way, you can enjoy the profits and stay invested in AI’s secular trend.
