Is Nvidia Stock a Bargain?

Core Viewpoint - Nvidia's stock performance has been surprisingly modest despite strong financial results and the ongoing AI boom, raising questions for growth investors [1][2]. Financial Performance - Nvidia reported a 69% year-over-year revenue increase to $44.1 billion for the first quarter of fiscal 2026, with guidance indicating continued robust growth [2][6]. - The company is projected to achieve$45 billion in revenue for the second quarter, reflecting a 50% year-over-year growth despite challenges from U.S. export controls [6]. Market Valuation - Nvidia trades at 21.8 times projected 2028 earnings, which is considered reasonable given its significant revenue growth and dominance in the AI infrastructure market [4][13]. - The current stock performance, combined with accelerating fundamentals, may represent a compelling value proposition in the technology sector for 2025 [4]. Impact of Export Controls - U.S. export controls limiting access to the Chinese market have negatively impacted Nvidia, resulting in a $4.5 billion charge and an estimated$2.5 billion revenue loss in the first quarter, with an additional $8 billion expected in the second quarter [5]. - Despite these restrictions, Nvidia's ability to generate substantial revenue indicates resilience and a strong demand from other global markets [6][8]. Product Performance - Nvidia's data center revenue reached$39.1 billion, growing 73% year over year, largely driven by the adoption of the Blackwell architecture [7][9]. - Gaming revenue also saw a significant increase, jumping 48% sequentially and 42% year over year, showcasing Nvidia's ability to diversify its revenue streams beyond AI applications [10]. Ecosystem and Competitive Advantage - Nvidia's expansion into networking, software, and services enhances its revenue potential and increases customer switching costs, with the CUDA software platform remaining the industry standard for AI development [11][12]. - As enterprises transition from AI experimentation to production deployment, Nvidia's comprehensive ecosystem positions it to capture a larger share of existing customers' budgets [12]. Long-term Outlook - Nvidia's valuation may still be considered a bargain in hindsight, given its leadership in AI infrastructure and the ongoing evolution of AI technologies [14].