After Earnings, Is Nvidia Stock a Buy, a Sell, or Fairly Valued?

Nvidia NVDA released its fiscal first-quarter earnings report on May 28. Here’s Morningstar’s take on Nvidia’s earnings and stock.

Key Morningstar Metrics for Nvidia

• Fair Value Estimate: $140.00
• Morningstar Rating: ★★★
• Economic Moat: Wide
• Morningstar Uncertainty Rating: Very High

What We Thought of Nvidia’s Earnings

Nvidia reported fiscal first-quarter revenue of $44.1 billion, ahead of guidance and up 69% from the year-ago period. Second-quarter revenue guidance of $45 billion would represent 50% year-over-year growth. Both figures incorporate lost revenue from China due to US export controls.

Why it matters: We’re encouraged by Nvidia’s revenue growth despite being blocked from selling H20 products (custom-built for China’s artificial intelligence market). This caused a $4.5 billion inventory write-off and foregone revenue of $2.5 billion and $8.0 billion in the first and second quarters, respectively.

• First-quarter data center revenue of $39.1 billion was up 73% year over year, as almost 70% of revenue came from Nvidia’s latest Blackwell products. Of this revenue, $4.6 billion came from H20 sold into China before the restrictions were enacted on April 9, 2025.
• Nvidia’s gaming revenue was a bright spot, up 48% sequentially and up 42% year over year, as new gaming products based on the Blackwell architecture were well-adopted.

The bottom line: We raise our fair value estimate for wide-moat Nvidia to $140 per share from $125 as Blackwell supply (and revenue) expanded faster than we anticipated and should support higher long-term AI revenue. We retain our Very High Morningstar Uncertainty Rating.

• Shares rose about 5% after hours following the results and appear fairly valued, as we think the market was similarly impressed by Blackwell and calmed by Nvidia’s ability to grow despite China export controls.

Coming up: Nvidia expects revenue in the July quarter to increase about 3% sequentially, with modest growth across all segments. Growth would have been 14% sequentially and 77% year over year if Nvidia were allowed to sell $8.0 billion of H20 products into China as desired.

Our Valuation of Nvidia Stock and the Outlook Going Forward

• We think the stock is fairly valued and have raised our fair value estimate to $140 per share from $125, as supply of its latest generation of products (Blackwell) expanded faster than expected. This should enable Nvidia to generate more revenue in the near-term.
• We’re also optimistic about some of the recent sovereign deals between the United States and Saudi Arabia and the United Arab Emirates.
• Nvidia is likely touring Europe in June, and it’s possible that more large deals, built on the AI tech stack with chips from Nvidia, might be announced. Even with these announcements, however, the spending won’t occur overnight.

Fair Value Estimate for Nvidia

With its 3-star rating, we believe Nvidia stock is fairly valued compared with our long-term fair value estimate of $140 per share, which implies an equity value of roughly $3.3 trillion. Our fair value estimate implies a fiscal 2026 (ending January 2026 or effectively calendar 2025) price/adjusted earnings multiple of 33 times and a fiscal 2027 forward price/adjusted earnings multiple of 26 times.

Our fair value estimate, and Nvidia’s stock price, will be driven by its prospects in the data center, or DC, and AI GPUs, for better or worse. Nvidia’s DC business has achieved exponential growth already, rising from $3 billion in fiscal 2020 to $115 billion in fiscal 2025. DC revenue remains supply-constrained and near-term revenue will rise as more supply comes online. We model $79 billion of DC revenue in the first half of fiscal 2026, in line with results/guidance. We then model incremental quarterly revenue growth of about $4.5 billion per quarter in the October 2025 and January 2026 quarters, as we expect additional chip supply to come online to satisfy insatiable AI demand.

Read more about Nvidia’s fair value estimate.

Economic Moat Rating

We assign Nvidia a wide economic moat, thanks to intangible assets around its graphics processing units and, increasingly, switching costs around its proprietary software, such as its Cuda platform for AI tools, which enables developers to use Nvidia’s GPUs to build AI models.

Nvidia was an early leader and designer of GPUs, which were originally developed to offload graphic processing tasks on PCs and gaming consoles. Nvidia has emerged as the clear market share leader in discrete GPUs. We attribute Nvidia’s leadership to intangible assets associated with GPU design, as well as the associated software, frameworks, and tools required by developers to work with these GPUs. Introductions such as ray-tracing technology and the use of AI tensor cores in gaming applications are signs, in our view, that Nvidia has not lost its GPU leadership in any way.

Read more about Nvidia’s economic moat.

Financial Strength

Nvidia is in outstanding financial health. As of April 2025, the company held $53.7 billion in cash and investments, as compared with $8.5 billion in short-term and long-term debt. Semiconductor firms tend to hold large cash balances to help them navigate the cycles of the chip industry. During downturns, this provides them with a cushion and flexibility to continue investing in research and development, which is necessary to maintain their competitive and technology positions. Nvidia’s dividend is virtually immaterial relative to its financial health and forward prospects, and most of the firm’s distribution to shareholders comes in the form of stock buybacks.

Read more about Nvidia’s financial strength.

Risk and Uncertainty

We assign Nvidia an Uncertainty Rating of Very High due to the nascency of the AI market. In our view, Nvidia’s valuation will be tied to its ability to grow within AI, for better or worse. Nvidia is an industry leader in GPUs used in AI model training, while carving out a good portion of demand for chips used in AI inference workloads (which involves running a model to make a prediction or output).

We see a host of tech leaders vying for Nvidia’s leading AI position. We think it is inevitable that leading hyperscale vendors will seek to reduce their reliance on Nvidia and diversify their semiconductor and software supplier base, including by developing in-house solutions.

Read more about Nvidia’s risk and uncertainty.

NVDA Bulls Say

• Nvidia’s GPUs offer industry-leading parallel processing, which was historically needed in PC gaming applications and has expanded into crypto mining, AI, and perhaps additional future applications.
• Nvidia’s data center GPUs and Cuda software platform have established the company as the dominant vendor for AI model training, which is a use case that should rise exponentially in the years ahead.
• Nvidia is expanding nicely within AI, not just supplying industry-leading GPUs but also moving into networking, software, and services.

NVDA Bears Say

• Nvidia is a leading AI chip vendor today, but other powerful chipmakers and tech titans are focused on in-house chip development.
• Although Cuda is a leader in AI training software and tools today, leading cloud vendors would likely prefer to see greater competition in this space and may shift to alternative open-source tools if they were to arise.
• Geopolitics have entered the AI space, most notably limiting Nvidia’s AI opportunities in China. We are skeptical that Nvidia’s China AI business will be allowed to recover, regardless of the US administration

This article was compiled by Gautami Thombare.