NVIDIA NVDA
What does NVIDIA do?
NVIDIA develops graphics processors, networking technology and software for accelerated computing. Originally grown large in the gaming graphics market, the company has developed into a central provider of infrastructure for artificial intelligence. It reports in two segments: Compute & Networking and Graphics.
In the Compute & Networking segment, revenue comes from compute accelerators and networking platforms for data centers, AI software and solutions for the automotive industry. The Graphics segment includes GeForce graphics cards for gaming and PCs as well as RTX products for professional workstations. Customers include cloud providers, manufacturers of servers and devices, system integrators and end customers. In terms of competition, NVIDIA relies on the close integration of hardware, networking technology and the CUDA software platform, which ties developers to the ecosystem. Competitors are other chip providers as well as the in-house chips of large cloud companies.
Score profile
Rank vs. Semiconductors (40 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, NVIDIA ranks among the best in the group Semiconductors (9.4/10). On growth, the company ranks among the best in the group Semiconductors (8.3/10). On valuation (higher = cheaper), the stock ranks above average in the group Semiconductors (6.5/10). On financial strength, NVIDIA ranks above average in the group Semiconductors (6.0/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 10.6x | 18.7x | better than 93 % |
| Trailing P/E | 21.4x | 42.4x | better than 78 % |
| PEG ratio | 0.2x | 0.8x | better than 89 % |
| EV/EBITDA | 21.3x | 21.3x | better than 50 % |
| Price/sales | 13.5x | 5.8x | better than 26 % |
| Price/book | 17.8x | 5.1x | better than 4 % |
| Revenue growth | 105.9% | 25.5% | better than 91 % |
| Earnings growth | 127.8% | 7.4% | better than 75 % |
| Gross margin | 74.7% | 53.3% | better than 86 % |
| Operating margin | 66.2% | 15.5% | better than 96 % |
| Net margin | 63.7% | 10.3% | better than 96 % |
| Return on equity | 117.2% | 8.6% | better than 99 % |
| Debt/equity | 17.0% | 36.5% | better than 69 % |
| Current ratio | 4.6x | 3.3x | better than 71 % |
| Free cash flow yield | 1.0% | 1.3% | better than 40 % |
| Dividend yield | 0.6% | 1.2% | – |
| Payout ratio | 3.5% | 38.0% | – |
| Beta | 2.25 | 1.92 | – |
Valuation: what is NVIDIA worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give NVIDIA a model range of 168.86 USD to 298.13 USD per share.
57 analysts, average rating “Strong buy”, average price target 325.78 USD (+92.9%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Demand for AI computing power in data centers largely determines the company's revenue and profit.
- The software ecosystem around CUDA strengthens customer loyalty and contributes to pricing power.
- Investment budgets of large cloud providers and enterprise customers directly influence sales of data center products.
Risks
- The strong dependence on a few large cloud customers makes the business vulnerable to changed investment plans.
- Export restrictions and geopolitical tensions can limit access to important sales markets, especially China.
- Manufacturing at external contract manufacturers is concentrated in a few locations and creates supply chain dependencies.
What to look for with NVIDIA
The gross margin is particularly informative because it shows whether the company can maintain its pricing power amid high demand and growing competition.