Does NVIDIA Stock Have More Upside?
NVIDIA (NVDA) stock is at an interesting point right now. It has strong momentum, and if you bet on it, you are betting on a company with strong margin, good cash flow, low-debt capital structure, and good tailwinds. But is that enough?
Why Bet On NVDA Now?
The primary thesis is that NVIDIA is the sole-source enabler of the AI industrial revolution. The adoption of its next-generation ‘Blackwell’ and ‘Rubin’ platforms will fuel a durable capital investment cycle as hyperscalers, enterprises, and sovereign nations build out ‘AI factories,’ sustaining hypergrowth well into calendar 2026 and 2027.
- Data Center revenue growth accelerated to +75% YoY in Q4 FY26.
- Forward guidance for Q2 FY27 was raised to $91.0 billion (plus or minus 2%). This indicates sustained sequential growth, exceeding a record prior quarter.
- The CUDA software platform has a massive ecosystem of over 4 million developers, creating a deep and defensible competitive moat.
- Management has secured supply commitments into calendar 2027, signaling high confidence in long-term demand visibility.
Before making any decision, it helps to understand if the above factors align with what has been driving NVDA stock so far, or has the market view changed?
- NVIDIA Earnings: New Segments And A $200B CPU TAM Reveal A Business Beyond Hyperscale
- NVDA Stock: The Setup Hiding In Plain Sight
- Why NVDA, MU Could Outperform Rambus Stock
- Is The Power Grid Now Nvidia’s Biggest Growth Constraint?
- Why AVGO, NVDA Could Outperform Microchip Technology Stock
- Does NVIDIA Stock Still Have Room to Run?
How Do The Fundamentals Look?
- Long-Term Profitability: About 50.5% operating cash flow margin and 60.6% operating margin (last 3-year average).
- Strong Momentum: Currently in the top 10th percentile of stocks in terms of “trend strength” – our proprietary momentum metric.
- Revenue Growth: NVIDIA saw revenue growth of 70.7% LTM and 121.7% last 3-year average, but this is not a growth story
Below is a quick comparison of NVDA fundamentals with S&P medians.
| NVDA | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Semiconductors | – |
| PS Ratio | 20.6 | 3.2 |
| PE Ratio | 32.8 | 23.9 |
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| LTM* Revenue Growth | 70.7% | 7.4% |
| 3Y Average Annual Revenue Growth | 121.7% | 5.7% |
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| LTM* Operating Margin | 64.0% | 18.4% |
| 3Y Average Operating Margin | 60.6% | 18.3% |
| LTM* Op Cash Flow Margin | 49.6% | 21.1% |
| 3Y Average Op Cash Flow Margin | 50.5% | 20.0% |
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| DE Ratio | 0.2% | 21.5% |
*LTM: Last Twelve Months
The Bear View & The Current Investment Debate
The current investment debate on NVDA is centered around the following: Can NVIDIA’s hypergrowth be sustained by the ‘AI factory’ build-out, or will its largest customers in-source custom silicon, creating a growth ceiling?
The prevailing sentiment is bullish. Thesis is firing on all cylinders. Record data center growth (+75% YoY) and sky-high forward guidance ($78B) confirm the AI build-out is accelerating, not peaking. The moat is widening, not shrinking. Geopolitical noise and supply risks are manageable headwinds, not thesis-breakers.
| Bull View | Bear View |
|---|---|
| The CUDA ecosystem and rapid architectural innovation (Blackwell/Rubin) create an insurmountable moat, making NVIDIA the sole-source enabler for the multi-year AI industrial revolution. | Hyperscalers, representing over 50% of data center revenue, are aggressively developing in-house chips to cut costs and reduce dependency, posing a long-term structural threat. |
Understanding a bear view is one thing, but holding an investment through volatile market phases is another. It certainly makes you more resilient if you internalize how the stock has fallen during past market crashes. Staying invested matters.
NVDA Is Just One of Several Such Stocks
You could also check out the following:
These stocks have high operating (cash flow from operations) margins, low-debt capital structure, and strong momentum
A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:
- Average 12-month forward returns of nearly 15%
- 12-month win rate (percentage of picks returning positive) of about 60%
Staying Invested Over Chasing Momentum
Chasing momentum in a single stock like NVDA is a high-stakes game. When a high-flyer hits a sudden 20% rough patch, the volatility often forces investors to panic and exit early, missing the long-term gains they were after. So how do you stay invested? Simple. Through the “Portfolio” approach.
The Trefis High Quality Portfolio (HQ) is designed to keep you in the game. By spreading your exposure across 30 quality stocks, it neutralizes the “all-or-nothing” risk of a single stock. It dampens the sharp, stomach-churning drops while maintaining upside exposure.