Nvidia (NVDA) reported another quarter of robust results, with revenue surpassing expectations and continued strength in its data center business, particularly from its AI GPU offerings. Despite these impressive results, analysts at Morningstar believe Nvidia’s stock is currently fairly valued, maintaining a $130 fair value estimate.
Earnings Overview For the January quarter, Nvidia posted $39.3 billion in revenue, a 12% sequential increase and a 78% year-over-year jump, beating both its own guidance and Wall Street’s consensus. Data center revenue, a key growth driver, surged by 93% year-over-year. While gross margin was slightly down due to new product launches, Nvidia’s outlook remains strong, projecting $43 billion in revenue for the April quarter, up 9% sequentially and 65% from the previous year.
Stock Valuation Morningstar’s fair value estimate of $130 implies a valuation of around $3.2 trillion for Nvidia, which represents a forward price/earnings multiple of 29x for fiscal 2026. The valuation reflects the potential for continued growth in the data center and AI sectors but also incorporates risks related to future spending trends beyond 2025.
Strong Economic Moat Nvidia benefits from a “wide” economic moat, driven by its leadership in GPU design and software platforms, particularly its CUDA ecosystem, which developers rely on for AI model development. Nvidia dominates the discrete GPU market, holding an over 80% market share, with its average selling prices often double that of competitors like AMD.
Financial Strength The company’s financial position is solid, with $38.5 billion in cash and investments as of October 2024, compared to $8.5 billion in debt. Nvidia’s ability to weather market cycles with this strong balance sheet supports continued R&D investments and the maintenance of its competitive edge.
Risk and Uncertainty Nvidia faces high uncertainty, with its stock heavily dependent on the growth of its data center and AI segments. While Nvidia currently leads in AI GPU usage, it faces growing competition from other tech giants like AMD and Intel, who are actively expanding their AI-focused chip offerings.
In conclusion, Morningstar views Nvidia’s stock as fairly valued, acknowledging its strong performance and market position, while also considering the risks associated with future competition and market dynamics.
Related topics:
What Are the 5 Cheapest Stocks on Robinhood Right Now?
Is It Smart to Buy Twitter Stock Right Now?
