While Others Struggle, NVIDIA (NVDA) Defies Tech Slowdown

NVIDIA (NVDA) continues to ride the AI wave with another record-breaking quarter, as revenue nearly doubled to $35.1 billion.

Our TrackStar data shows NVIDIA dominating search interest among semiconductor stocks, with 26,302 searches by financial professionals – nearly triple the attention of runner-up Advanced Micro Devices (AMD) at 8,915 searches. 

This overwhelming interest comes as the company announced massive demand for its AI chips, particularly the Hopper architecture and new H200 offering.

The key question now: Can NVIDIA maintain its AI dominance as it transitions to its next-generation Blackwell architecture amid supply constraints and growing competition?

NVIDIA’s Business

NVIDIA pioneered accelerated computing and has transformed itself from a gaming graphics company into the backbone of the AI revolution. 

The company’s chips power everything from cloud computing and autonomous vehicles to professional workstations and gaming PCs.

The Santa Clara-based technology giant specializes in designing and selling high-performance GPUs, networking solutions, and complete AI/ML computing platforms. 

Its products have become essential infrastructure for training large language models and running AI applications at scale.

NVIDIA segments its business into the following areas:

• Data Center (87.7% of total revenues) – AI and high-performance computing chips, including the flagship H100 and upcoming Blackwell architecture, plus networking solutions
• Graphics (11.5% of total revenues) – GeForce gaming GPUs, workstation graphics, and visualization solutions
• Automotive & Other (0.8% of total revenues) – Self-driving vehicle platforms and embedded systems

Q3 was highlighted by record Data Center revenue of $30.8 billion, up 112% year-over-year, driven by intense demand for AI training and inference chips. 

Cloud service providers represented about 50% of Data Center revenue, with consumer internet companies and enterprises making up the remainder.

The company is executing a major transition to its next-generation Blackwell architecture, with production starting in Q4 FY2025. 

Management noted both Hopper and Blackwell systems will face supply constraints, with Blackwell demand expected to exceed supply for several quarters in FY2026.

To meet surging demand, NVIDIA has invested heavily in supply chain capacity and made strategic prepayments of $5.2 billion to suppliers.

The company is also expanding its product portfolio with networking solutions like the Spectrum-X ethernet platform to capture more of the AI infrastructure stack.

Financials

Source: Stock Analysis

NVIDIA’s financial performance has been nothing short of stellar. Revenue grew 94% year-over-year to $35.1 billion, with operating income more than doubling to $21.9 billion. 

Gross margin expanded to 74.6% thanks to strong Data Center mix and pricing power.

The company generated $17.6 billion in operating cash flow during Q3, up from $7.3 billion a year ago. 

This massive cash generation gives NVIDIA significant flexibility to invest in R&D, capacity, and strategic initiatives while returning capital to shareholders through $11.2 billion in share repurchases.

The balance sheet remains rock solid with $38.5 billion in cash and investments against just $8.5 billion in debt. 

Working capital management has been impressive despite the growth, with inventory of $7.7 billion representing 78 days of supply.

The only potential concern is rising operating expenses, up 44% year-over-year as NVIDIA invests heavily in R&D and infrastructure to support its expanding ambitions. 

However, with revenue growing even faster, operating leverage remains strong.

Valuation

Source: Seeking Alpha

NVIDIA currently trades at 55.7x trailing non-GAAP earnings, compared to AMD at 45.9x and Broadcom (AVGO) at 35.9x. 

While this premium valuation may seem steep, NVIDIA’s superior growth and profitability metrics help justify it.

The company’s EV/Sales ratio of 28x is also well above peers, but this needs to be viewed in context of NVIDIA’s 74.6% gross margins and massive operating leverage. 

With consensus estimates likely to rise further given the strong results and guidance, valuation multiples could compress naturally through earnings growth.

Growth

Source: Seeking Alpha

NVIDIA’s growth has been exceptional, with revenues up 195% year-over-year – dramatically outpacing competitors like AMD (+9.9%) and Intel (INTC) (+2.6%). 

Even more impressive is that this growth is accelerating, with FY2025 Q4 guidance implying further acceleration to $37.5 billion.

The three-year revenue CAGR of 63.8% showcases NVIDIA’s ability to sustain high growth rates at massive scale. 

Forward revenue growth is expected to moderate but remain robust at 90%, supported by the ongoing AI investment cycle and new product launches.

Profitability

Source: Seeking Alpha

NVIDIA leads the industry in profitability metrics across the board. 

Its 75.9% gross margin and 61.9% EBIT margin dwarf competitors while generating an industry-leading 73.4% return on assets.

This superior profitability stems from NVIDIA’s competitive moats in AI software and hardware, allowing it to maintain premium pricing even as it scales. 

Operating leverage is evident, with operating expenses growing much slower than revenue.

Our Opinion 9/10

NVIDIA has positioned itself at the center of the AI revolution and is executing flawlessly to capture this opportunity. 

While supply constraints and valuation create some near-term risks, the company’s technology leadership, ecosystem advantages, and financial strength make it difficult to bet against.

The upcoming Blackwell transition needs careful management, but NVIDIA has demonstrated its ability to handle major product cycles while maintaining growth and profitability. 

With AI adoption still in early stages and the company expanding into networking and software, NVIDIA’s long-term growth trajectory remains compelling despite its massive scale.