Nvidia (NASDAQ: NVDA) has emerged as a key player in the ongoing market frenzy, drawing attention from both investors and analysts alike. After reporting robust second-quarter results on Aug. 28, the AI frontrunner shattered Wall Street’s expectations, with adjusted earnings per share of $0.68 on sales totaling $30 billion, surpassing the projected figures by a significant margin.
Despite this stellar performance, the post-earnings period saw Nvidia’s stock take a hit, prompting concerns about the company potentially reaching its peak valuation.
Nvidia’s Strong Gross Margins Point to Positive Outlook
Nvidia’s impressive gross margins have remained stable, driven by the surging demand for its cutting-edge processors in the AI space. Data tracking the company’s gross margin over a three-year period ending in the first quarter of its 2025 fiscal year showcases a consistent upward trend.
NVDA Gross Profit Margin (Quarterly) data by YCharts
The recently reported figures demonstrate a gross margin of 75.1% in Q2, with guidance predicting a margin of 74.4% for fiscal Q3 and a mid-70s percentage for the full-year period. Despite a slight anticipated decrease in prices for its AI processors, Nvidia’s GPUs continue to exhibit strong pricing power, driven by ongoing demand from major tech firms looking to enhance their AI infrastructure.
As the company prepares for the release of its next-gen Blackwell chips in the near future, characterized by a significant leap in GPU technology, the bullish case for Nvidia appears robust and intact.
Is Now the Time to Invest in Nvidia?
Before diving into Nvidia stock, it’s crucial to weigh the following:
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Keith Noonan holds no positions in companies mentioned. The Motley Fool endorses and holds positions in Nvidia. Read the official disclosure policy for more information.