What Happened?
Shares of leading designer of graphics chips Nvidia (NASDAQ:NVDA) jumped 5.1% in the morning session after market sentiment improved ahead of CEO Jensen Huang's speech at CES (Consumer Electronic Show) 2025. Markets expect NVDA to provide updates on its next-generation GPU called Rubin. Wall Street analysts are also positive, with Bernstein reaffirming a Buy rating, adding, "Our top AI picks remain NVDA."
Separately, Taiwan's Foxconn also reported strong fourth-quarter results, partly fueled by strong demand for AI servers.
Finally, Microsoft unveiled plans to invest $80 billion globally in data centers in 2025, a move that should boost demand for AI chips from suppliers like Nvidia. Overall, these developments suggest that 2025 could be another good year for NVDA.
After the initial pop the shares cooled down to $151.69, up 4.9% from previous close.
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What The Market Is Telling Us
Nvidia’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 11 months ago when the stock gained 15.5% on the news that the company reported fourth-quarter results with a meaningful revenue beat, strong gross margin improvement, and EPS outperformance vs. Wall Street's estimates. Notably, revenue grew 265% year-on-year and 22% sequentially. The strong top line performance was mostly driven by the data center segment, which was up 409% year-over-year and 27% sequentially as demand for Nvidia processors optimized for generative AI, LLMs (large language models), and other AI workloads continued to accelerate. Notably, the company estimated that roughly 40% of Data Center revenue was driven by AI-related applications.
Guidance for the next quarter was also good, with revenue, gross margin, and implied operating profit coming in ahead of expectations. The company noted that growth in the data center and professional visualization segments is expected to more than offset the anticipated seasonal decline in gaming.
Zooming out, we think this was a great quarter that shareholders will appreciate.
Nvidia is up 9.7% since the beginning of the year, and at $151.69 per share, has set a new 52-week high. Investors who bought $1,000 worth of Nvidia’s shares 5 years ago would now be looking at an investment worth $25,595.
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