Market heavyweight Nvidia (NVDA) delivered blockbuster results in Q4 of its fiscal year ended January 2025, which saw revenue soar to a record $39.3 billion, up 12% sequentially and 78% year-over-year. The artificial intelligence chip leader posted $0.89 of EPS in the period, up 71% year-over-year, as the company capitalized on accelerating demand for AI-driven computing, particularly for its Blackwell AI platform, which contributed billions in its first quarter of sales.
Data Center revenue hit a record $35.6 billion, up 93% from last year and 16% sequentially, fueled by hyperscaler adoption and rapid deployment of Nvidia’s GB200 systems across AWS, Microsoft Azure and Google Cloud. Meanwhile, the gaming segment softened, with revenue of $2.5 billion reflecting a 22% decline sequentially and an 11% drop year-over-year, though management remains optimistic about AI-driven gaming innovations.
The Future For NVDA Looks Bright
Looking ahead, NVDA expects Q1 fiscal year 26 revenue of approximately $43 billion, representing continued momentum despite expectations for lower gross margins of around 70.6% (GAAP) and 71.0% (non-GAAP). The company remains aggressive in its expansion, recently announcing partnerships with Verizon for AI-powered 5G, collaborations with biotech leaders in healthcare AI, and its first R&D center in Vietnam.
Analysts are projecting fantastic bottom-line growth, with the consensus FY 2026 (ends January 2026) EPS estimate now residing at $4.54, up from $2.99 in FY 2025. Further, the projections for FY 2027 and FY 2028 presently stand at $5.70 and $6.46, respectively.
But The Valuation Is Rich
No doubt, the growth rates Nvidia has been able to achieve are nothing short of remarkable, underpinned by revolutionary achievements in chip design. Still, even after an 8% post-earnings whack to the stock price, the market capitalization stands at $3 trillion, meaning the law of large numbers should give investors pause. After all, the more-than-$250-billion market-cap hit for NVDA on February 27 was larger in size than the entire market cap of household names like McDonald’s, American Express and Walt Disney.
That is not to say that I think NVDA is trading at a ridiculous valuation, as was the case for many profitless stocks during the 2000 Tech Bubble. Still, a forward P/E ratio of 27, a price-to-sales ratio of 22.5 and a price-to-book value ratio of 37 make the stock too expensively valued for my taste, as such a lofty price raises concerns about whether the growth trajectory can match (or dare I say outpace) current market expectations.
Indeed, I would bet that if someone had the Q4 results and guidance ahead of time, he or she would have been buyers of NVDA as the numbers were spectacular. While demand for AI infrastructure remains robust, much of the company’s explosive growth has been priced into the stock, leaving little margin for error. Any slowdown in data center spending, increased competition from AMD and others, and potential custom AI chips developed by cloud giants, not to mention macroeconomic headwinds, could pressure margins and dampen investor enthusiasm.
Plenty Of Less-Expensive Opportunities In AI
Certainly, I am keeping a watchful eye on NVDA and a double-digit share price could have me singing a different tune about the stock, especially as I think AI will be a major growth story for years to come.
Nvidia CEO Jensen Huang highlighted the transformative impact of AI on global industries, stating, “The demand for Blackwell is extraordinary. AI is evolving beyond perception and generative AI into reasoning. With reasoning AI, we’re observing another scaling law, inference time or test-time scaling. The more computation, the more the model thinks, the smarter the answer. Models like OpenAIs, Grok-3, DeepSeek-R1 are reasoning models that apply inference time scaling. Reasoning models can consume 100x more compute. Future reasoning models can consume much more compute.”
For investors looking to gain exposure to AI without the premium valuation of Nvidia, I highlighted more than a dozen stocks in my latest Special Report.
Investment Insight: Decoding AI and Generating Investment Ideas
Nvidia’s AI-fueled data center boom has turned into a gusher for the semiconductor supply chain, offering tremendous opportunity for Lam Research (LRCX). The company makes the high-tech picks and shovels—etch and deposition tools—needed to churn out high-bandwidth memory and advanced logic chips, both of which are in hot demand as AI workloads get more power-hungry. With memory giants like Samsung and SK Hynix cranking up production to keep pace with Nvidia’s Blackwell ramp, Lam is sitting in the catbird seat. As long as AI keeps gobbling up ever-more data and demanding ever-faster chips, I think Lam’s business will hum along just fine, making it another smart way to hitch a ride on the AI train at a more reasonable price tag. And LRCX even comes with a modest 1.2% current dividend yield.
Disclosure: Please note that shares of the stocks mentioned are owned by asset management clients of Kovitz Investment Group Partners, LLC, a SEC registered investment adviser. For a list of stock recommendations like these made in The Prudent Speculator, visit theprudentspeculator.com.
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