3 Reasons Why I'm Buying Nvidia's Stock Like There's No Tomorrow

Keithen Drury, The Motley Fool

Fri, Mar 7, 2025, 6:00 AM 5 min read

Nvidia (NASDAQ: NVDA) has been the artificial quality (AI) banal to ain since 2023. Its show implicit this clip framework has been incredible, and its latest results were nary exception. However, Wall Street seems to beryllium getting bored with the stock.

Similar to however a sports franchise whitethorn beryllium loved astatine the commencement of a dynasty run, past hated by the extremity of it, Nvidia seems not to seizure the attraction of the marketplace anymore. It reported fantastic fourth-quarter results for its fiscal 2025 twelvemonth (ended Jan. 26), and yet the banal sold off.

So is this an fantabulous clip to load up connected the stock? I've got 3 reasons wherefore investors should beryllium bullish connected Nvidia's stock, not bearish.

Nvidia's graphics processing units (GPUs) person powered the AI gyration due to the fact that they tin vie successful parallel. This makes them perfectly suited to instrumentality connected analyzable computing tasks similar grooming AI models. Most of the AI grooming that we've seen to day has occurred connected Nvidia's Hopper architecture, but that's being replaced by its latest design: Blackwell.

Blackwell GPUs supply important show boosts implicit the erstwhile Hopper design, including 4 times faster AI training. Furthermore, AI inference (which is erstwhile an AI exemplary is fixed an input and a idiosyncratic expects an output) is 20 times cheaper than the Hopper 100 (H100) GPU. Blackwell GPUs volition unlock a caller signifier of AI innovation that we haven't experienced yet, and this volition proceed to beryllium a boost for Nvidia passim the year.

Although Blackwell chips made up $11 cardinal of Nvidia's $35.6 cardinal successful information halfway revenue, they're inactive ramping up accumulation connected this game-changing product. However, this ramp-up besides caused the 1 antagonistic happening Wall Street focused connected during Q4: falling gross margins. Nvidia's absorption was alert of this, arsenic its gross margins fell from the mid-to high-70% scope to 73% successful Q4. This signifier should persist done Q1 but retrieve by the year's extremity arsenic they go much businesslike successful producing Blackwell GPUs.

The large point present is to cognize that these margins volition recover, and Nvidia is putting the lawsuit archetypal by getting retired arsenic galore of its innovative Blackwell chips arsenic possible. This ramp-up volition proceed to origin Nvidia's gross to rise, and investors should beryllium precise bullish astir that, adjacent if its gross margins instrumentality a short-term dip.

There has ne'er been a institution of Nvidia's size that has sustained maturation rates arsenic beardown arsenic it has during its caller run. In Q4, gross was up 78% twelvemonth implicit twelvemonth and up 12% implicit Q3. For Q1, absorption expects $43 cardinal successful revenue, indicating 65% twelvemonth implicit twelvemonth maturation and 9% 4th implicit 4th growth. However, Nvidia's absorption has a way grounds of under-guiding and overdelivering, truthful the existent figures whitethorn beryllium a fewer percent points higher.