Nvidia (NVDA 1.86%) reported its fiscal 2027 Q1 earnings on May 20, beating on both the top and bottom line. Revenue of $81.6 billion exceeded expectations of $78.8 billion, while earnings per share of $1.87 was higher than the $1.76 expected.
Still, the stock price didn’t respond positively. When you’re a $5 trillion company, it just becomes increasingly difficult to impress the market. The stock price has climbed nearly 1,400% in the last five years, and many wonder whether the biggest gains have already been made.
That answer depends on a few factors, including expectations around investing time horizons.
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A crowded arena
For artificial intelligence (AI), Nvidia has been the face of the investable opportunity with its advanced chips. That space, however, is becoming more crowded as companies look to become less reliant on the dominant chipmaker.
Nvidia’s own customers in big tech, like Meta Platforms, are developing their own custom chips. It’s also seeing competition heat up in the application-specific integrated circuit (ASIC) chip market. These are chips designed to perform specific functions. Cerebras Systems, which has an ASIC focus, went public in May.
Today’s Change
(-1.86%) $-4.09
Current Price
$215.42
Key Data Points
Market Cap
$5.2T
Day’s Range
$214.84 – $221.07
52wk Range
$132.92 – $236.54
Volume
5.8M
Avg Vol
171.3M
Gross Margin
74.15%
Dividend Yield
0.02%
It’s still a strong company
Despite increased competition, Nvidia remains financially strong. Its gross margin was 75% in the first quarter, indicating ample pricing power. It’s also boosting its per-share dividend from $0.01 to $0.25 and authorizing $80 billion in share buybacks, indicating it has plenty of cash.
Nvidia also has an opportunity in integrating AI software into hardware to interact with the physical world, or what some refer to as physical AI. Examples include chips that can power autonomous vehicles and robots.
Anyone expecting Nvidia to rise quickly after each earnings report or for the company to deliver another gain of 1,000% or more over the next five years is likely to be disappointed. In contrast, anyone who plans to hold this stock for a decade or longer can still make meaningful gains as Nvidia constantly strives to maintain its position as a leader in the AI chip market.
Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.
