Tech giant Nvidia Corporation (NASDAQ:NVDA) has been on a scintillating run over the past year, powered by AI-driven innovations catapulting its stock to breathtaking heights. However, following its rollicking performance for the better part of the year, we’ve seen NVIDIA stock take a much-needed breather. Nonetheless, with multiple catalysts powering its bullish momentum, particularly with its game-changing Blackwell processors, it’s difficult to ignore Nvidia at any point in the AI race. The recent dip in Nvidia’s stock price presents an excellent opportunity to buy into its growth story before a sustained rally fueled by upcoming interest rate cuts.
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For those who’ve been out of the loop for the past couple of years, Nvidia is a front-runner in AI and accelerated computing markets. Its explosive success in AI infrastructure, driven by its cutting-edge AI chips like the H100 and the eagerly anticipated Blackwell processors, led to north of 140% gain in its stock over the past year alone. Moreover, as we look ahead, the booming demand for AI chips continues pushing Nvidia to even greater heights as the AI revolution moves past the genesis stage.
A close-up of a colorful high-end graphics card being plugged in to a gaming computer.
Q2 Results Were Encouraging
Nvidia investors soured over the company’s Q2 results, dampening enthusiasm with a relatively soft Q3 guidance. However, investors accustomed to Nvidia’s stellar performances quickly ignored another monstrous quarterly showing, marked by a 122% revenue increase to $30.04 billion, beating estimates by a whopping $1.30 billion. Additionally, on the bottom-line, its net income surged 168%, driven by a roughly 155% increase in data center sales on a year-over-year (YOY) basis. However, the market punditry quickly pointed to a relatively sluggish 16% sequential growth from a previous 23%. Also, contracted from 78% in Q1 to 75% in Q2. Moreover, as mentioned earlier, the relatively modest revenue guidance of $32.5 billion for Q3 fell short of expectations. Consequently, Nvidia stock dipped post-earnings and has been down more than 7% in the past week.
Bright Outlook Ahead
Despite the supposed weak performance in Q2, Nvidia has plenty on its plate to continue growing rapidly. Based on analyst estimates, we could see the tech giant wrapping up the year with $125.50 billion in sales, a massive 105% jump from the last fiscal year. Moreover, its upcoming Blackwell architecture is touted as a major step up from previous iterations, which could significantly enhance AI performance and capabilities. The new platform integrates various advanced technologies, promising to outperform the current Hopper architecture dramatically. On top of that, the company is sitting on an enormous cash war chest, having generated more cash flow in the first two quarters of fiscal 2025 than in all four quarters last year.
Moreover, with Blackwell added to the mix, we could see a stunner of a Q4 this year for the company, kickstarting another rally. The bears will quickly point out the stock’s lofty price metrics, trading more than 30 times, trailing twelve-month (TTM) sales. However, based on 2025 estimates, it trades at approximately 16 times its 2025 sales at $174.25 billion. Also, based on 43 Wall Street analysts, it attracts a Strong Buy Rating, offering a 27% upside from current price levels.
NVDA is ranked 6th on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 179 hedge fund portfolios held NVDA at the end of the second quarter which was 186 in the previous quarter. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.