NVIDIA: The 2026 AI Captain

Core Insights - The AI frenzy is expected to persist until 2026, primarily driven by substantial capital expenditures for the necessary infrastructure [1] - NVIDIA has emerged as a key beneficiary of this trend, drawing comparisons to Tesla's growth trajectory from about 15 years ago [2] - Companies and governments worldwide are eager to access NVIDIA's AI GPUs, with notable deals already established with entities like Saudi Arabia, South Korea, and the U.K. [2] Company Performance - NVIDIA reported record-setting quarterly results, achieving sales of $57 million, a 62% increase, and a 67% rise in earnings per share (EPS) [4] - Data Center revenue reached $51.2 billion, reflecting a robust 66% growth year-over-year, surpassing consensus estimates of $49.1 billion [4] - Current consensus estimates predict a 55% increase in EPS and a 62% rise in sales for the current fiscal year, with FY27 also showing strong expectations of 56% EPS growth and 43% higher sales [8] Valuation Analysis - NVIDIA shares are not considered expensive historically, with a forward 12-month earnings multiple of 26.7X, significantly lower than the five-year median of 42.4X and the peak of 106.3X [9] - The current valuation reflects a 16% premium over the S&P 500, one of the lowest premiums observed in the last five years [11] Market Dynamics - Demand for NVIDIA's products remains strong, as companies continue to seek compute power [10] - The success of NVIDIA is closely tied to the hardware demand, which has a clearer visibility compared to other aspects of the AI market [12] - Despite potential challenges in the broader AI landscape, NVIDIA is expected to maintain its winning position through 2026 [13]