Key takeaways
- Nvidia stock rose again on Wednesday, nearing a record high it set last month, as the chipmaker benefited from investor excitement about the company's strong position amid the AI boom.
- The continued climb could raise questions about how the company's stock will sustain its record-breaking climb.
- Analysts at Trust Securities said earnings growth from rising sales is key to sustaining the stock's performance. He highlighted strong demand for AI chips and Nvidia's leading position as contributing to organic sales growth.
Shares of Nvidia (NVDA) rose again on Wednesday, nearing last month's record highs, as the chipmaker continued to benefit from investor excitement about the company's strong position in the artificial intelligence era.
The company's AI-fueled gains have sent it into the $3 trillion market capitalization club, a feat accomplished only by Microsoft ( MSFT ) and Apple ( AAPL ) in record time. The question on many people's minds is: How can the company and the stock sustain its monumental growth?
In a report released Wednesday, analysts at Trust Securities examined the question of “how the biggest can get bigger,” finding that earnings per share (EPS) growth is likely to be driven by organic sales growth. This will be how Nvidia continues its rise.
Analysts highlighted how other mega-market cap stocks, such as Apple, Microsoft, and Amazon ( AMZN ), said that while these stocks experienced declines in price-to-earnings ratios, then They also “outperformed the S&P through strong EPS growth.”
Organic sales growth supports outperformance.
Nvidia has consistently blown away investor expectations on revenue and earnings in recent quarters.
In May, Nvidia reported record revenue of $26.04 billion for the first quarter of its fiscal year 2025, more than triple the year-ago period, while EPS came in at $5.98, versus 82 cents. Both the top and bottom line numbers easily beat analysts' estimates.
“We are relatively confident that NVDA will continue to grow earnings (&EPS) faster than the S&P,” Trust analysts wrote in a new report.
The demand for AI chips continues to grow.
Growing demand for AI-related hardware could keep Nvidia's performance up.
Trust analysts highlighted near-term upside potential given that “NVDA's supply chain is poised to deliver $150-200B data center sales” in 2025. Amidst the ongoing AI boom, Nvidia has been unable to keep up with growing demand for its data center. Products.
Analysts said that while “AI server revenue growth is brisk (we estimate ~70% this year), unit growth is still ongoing” as it is still early in the AI era.
Big expectations from the Blackwell platform
Another component that could support growth is Nvidia's move toward offering “truly full-stack solutions” rather than just chips as it has in the past. The analysts said they expect “this dynamic was a major factor in NVDA's revenue and EPS growth” over the past four quarters, and they “expect this trend to continue.”
Nvidia's upcoming Blackwell platform offers a full-stack solution, supporting the data center needs needed to train and run AI workloads. Blackwell is already in high demand and is expected to drive the chipmaker's growth.
Analysts also noted that AI at the edge, where AI computing is performed on the device rather than on a third-party server, could be a “relatively neglected area of AI adoption.” Nvidia's growth in the AI edge market could add another $100 billion market for the company, he said.
Shares of Nvidia were up 2.5% at $134.72 in afternoon trading on Wednesday, reaching their all-time high of $135.58 set on June 18. The stock is up 172% so far in 2024.
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