NVIDIA Set to Lead "Age of AI Reasoning" - Buy and Hold the Stock

On March 18, at its annual GTC conference NVIDIA Corp. NVDA — the undisputed global leader of the generative artificial intelligence (AI)-powered graphical processing units (GPUs) — outlined its future trajectory. NVIDIA reaffirmed its commitment to continued innovation, evolution and execution. After the successful execution of Hopper GPUs (with sales of more than 1.3 million units), NVDA’s existing Blackwell GPUs have already seen over 3.6 million units sold to cloud providers. Its major customers are Microsoft Corp. MSFT, Alphabet Inc. GOOGL, Meta Platforms Inc. META and Amazon.com Inc. AMZN. NVIDIA is expected to unveil Blackwell Ultra — in the second half of 2025 and begin shipment of Vera Rubin — in 2026. In addition, the company decided to announce its roadmap for Rubin Next — to be introduced in 2027 and Feynman AI chips in 2028. Leveraging on Reasoning AI Models The major innovation for NVDA’s new chipsets is a qualitative shift from pureplay generative AI models to reasoning AI models. With this it downplayed the Chinese DeepSeek-related availability of low-cost solution concerns.In this regard, NVIDIA’s CEO Jensen Huang said that in contrary to the market’s opinion that DeepSeek is a major threat to NVDA’s high-cost chips, it has actually opened a huge growth opportunity for his company.According to Huang, “DeepSeek’s R1 AI model the first open-sourced reasoning model. This reasoning AI consumes 100 times more compute than a non-reasoning AI.” OpenAI's o1 and Alphabet’s Gemini 2.0 Flash Thinking are also reasoning models.Huang said that AI chips with faster speed will be best option for companies that opt for reasoning AI-based infrastructure to save costs and maximize returns. In this regard, NVDA’s upcoming Blackwell Ultra chips are expected to provide data centers 50 times more revenues than its Hopper systems buoyed by its superfast AI servicing capabilities to multiple users.Other Visionary DiversificationsNVIDIA unveiled new AI infrastructure for robotics. The automative industry may become another growth driver for NVIDIA in the future. The Automative segment’s growth was primarily driven by NVDA’s self-driving platforms. The company is increasingly focusing on powering ADAS, autonomous vehicles, and robotics. Nvidia announced new laptops and desktops using its chips, including two AI-focused PCs called DGX Spark and DGX Station that will be able to run large AI models such as Llama of Meta Platforms and R1 of DeepSeek.Excellent Estimate Revisions for NVDA StockNVIDIA has an expected revenue and earnings growth rate of 52% and 47.2%, respectively, for the current year (ending January 2026). The Zacks Consensus Estimate for current-year earnings has improved 0.2% in the last seven days.It has an expected revenue and earnings growth rate of 22.6% and 24.6%, respectively, for next year (ending January 2027). The Zacks Consensus Estimate for next-year earnings has improved 0.4% in the last seven days. Image Source: Zacks Investment ResearchLucrative Valuation of NVDA SharesNVIDIA has a return on equity (ROE) of 112.33% compared with the S&P 500’s ROE of 16.98% and the industry’s ROE of a mere 6.44%. NVDA has a current net margin of 55.85% compared with the industry’s net margin of 8.37% and the S&P 500’s net margin of 12.65%. It has a forward P/E (price/earnings) of 26.74% compared with the industry’s P/E of 28.33% and the S&P 500’s P/E of 18.31%.As of Jan. 26, 2025, NVDA’s cash, cash equivalents and marketable securities were $43.2 billion, up from $38.4 billion as of Oct. 27, 2024. The increases primarily reflect higher revenues partially offset by stock repurchases. As of Jan. 26, the total long-term debt was $8.46 billion, which remained unchanged sequentially. In fourth-quarter fiscal 2025, NVDA generated $16.6 billion in operating cash flow, up from the year-ago quarter’s $11.5 billion.Image Source: Zacks Investment ResearchInvestment Thesis for NVDANVIDIA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Shares of NVDA have seen a growth rate of -10.5% year to date. The stock is currently trading at a massive discount of 30.1% from its 52-week high price. At this price, the stock is looking highly lucrative.The short-term average price target of brokerage firms for the stock represents an increase of 49.69% from the last closing price of $117.70. The brokerage target price is currently in the range of $220-$130. This indicates a maximum upside of 85% and no downside. NVIDIA is a leading player in an industry with a trillion-dollar opportunity over the next 10 years. It has a long-term (3-5 years) EPS growth rate of 25.7%, significantly above the S&P 500 Index’s 12.7% growth rate. NVIDIA represents a rare opportunity to invest in a company with proven execution and substantial unrealized potential in the AI revolution. At this stage, it will be prudent to buy this stock and add more on every dip. Hold this stock for the long term as the company’s strong execution of the last several quarters and robust future projections will generate more value. Consequently, the stock price of NVIDIA should witness an attractive upside. The chart below shows the price performance of NVDA year to date.Image Source: Zacks Investment Research7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks