Nvidia Stock (NVDA) Preserves Pack Leader Status Following Q1

Nvidia (NVDA) once again proved to the markets, after reporting its Q1 earnings, that it remains the undisputed leader powering the global AI revolution, driven by relentless demand for its chips, even amid ongoing geopolitical and trade headwinds.

Beyond beating all key metrics (excluding one-off events) and offering guidance that resonated well with investors, Nvidia stock experienced a strong post-earnings surge, even if the momentum cooled slightly in the days that followed.

That said, there’s arguably still a missing spark needed to fully reignite the stock’s momentum heading into 2025. However, considering the broader growth story, Nvidia continues to trade at a very attractive valuation—one that could deliver meaningful alpha over the long term.

Short- to mid-term bumps, especially tied to macro risks in China, are worth monitoring but don’t alter the core thesis. Given the company’s strong execution and still-intact fundamentals, I continue to rate NVDA as a Buy.

When Crushing Expectations Becomes the Norm

As I pointed out in a previous article, for Nvidia stock to perform well after its Q1 Fiscal 2026 results, it wouldn’t be enough to simply beat estimates—it needed to crush them and deliver guidance that topped market expectations.

And that’s precisely what Nvidia did. The company reported revenue of $44 billion (as shown in the chart below), beating its own guidance of $43 billion—a massive 69% increase year-over-year. Gross margins, which had been a point of concern during the early stages of Blackwell’s rollout, came in at 71.3% (excluding the H20 charge, a financial write-off tied to its China-specific H20 GPUs). That’s also above the guided range of 70.6% to 71%.

Even more impressive was the Q2 guidance. Nvidia is projecting $45 billion in revenue, with a margin of plus or minus 2%. At the high end, that’s $45.9 billion—above the ~$45.5 billion consensus estimate leading into earnings day. Margins are expected to rise again, landing between 71.8% and 72.0%, with a margin of error of approximately 50 basis points.

At the top of that range, it suggests another round of margin expansion, which is exactly what investors wanted to hear. The company continues to state that once Blackwell production is fully ramped, margins could move into the 70–80% range over the next few quarters.

This stronger-than-expected performance, along with the recovery in margins, led to long-term EPS estimates getting bumped up by around 9% starting in FY2029. Revenue projections for those years were also revised higher by roughly 8%. Not surprisingly, Nvidia shares jumped more than 5% in after-hours trading following the earnings release, although the stock mostly leveled off in the sessions since.

What Fuels the Bears Right Now in Nvidia’s Story

In my view, the muted post-earnings reaction is actually a positive sign—it shows the market didn’t see enough red flags to justify a selloff in Nvidia stock. However, bears argue that even with revenue jumping nearly 70% year-over-year, signs of fatigue in the growth story are evident, with sequential growth of just 12% potentially indicating that Nvidia’s explosive momentum is entering a more seasonal or plateauing phase.

For a company priced for hypergrowth, this kind of quarter-over-quarter slowdown can be an early warning signal. And it’s not just about the numbers—geopolitical and regulatory pressures are starting to have real consequences. The U.S. export restrictions on AI chips like the H20 led to a $4.5 billion write-down and forced Nvidia to walk away from an estimated $15 billion in potential sales to China.

That’s not just a short-term financial hit—it also opens the door for competitors like Huawei to gain ground, especially as they accelerate domestic chip development. Although analysts have raised long-term estimates following Q1, there remains a genuine possibility that Nvidia’s global dominance could face challenges over time, particularly if policy pressures persist. When factoring in the impact of the H20 write-off, Q1 would have been the first quarter since the AI boom began in which Nvidia did not achieve sequential growth. And for a stock valued for perfection, even a modest slowdown can pose a valuation risk.

To me, the bigger issue here is that this goes beyond Nvidia—it’s about the strategic direction of U.S. tech leadership. As CEO, Jensen Huang has warned that if the U.S. continues down this restrictive path without a more balanced strategy, it may ultimately strengthen Huawei and erode America’s edge in AI. That’s the kind of long-term headwind that bears are likely to latch onto as the growth narrative gets more complicated.

Growth Justifies Nvidia’s Attractive Price Tag

But setting the macro risks aside, Nvidia’s bull case remains intact after Q1, especially when considering its growth. The company continues to stand out as a GARP (growth at a reasonable price) opportunity. Currently, Nvidia trades at 31.6x forward earnings, with a consensus growth rate of 29% CAGR over the next three to five years. This results in a PEG ratio of just 1x—virtually identical to Advanced Micro Devices (AMD), despite AMD’s significantly slower growth outlook, and significantly lower than most of the other Magnificent 7 names.

Of course, for that valuation to hold up, Nvidia’s growth trajectory needs to remain clean and strong. But honestly, it’s hard to think of another company with Nvidia’s size and scale, this level of fundamental quality, and such massive exposure to secular tailwinds like AI, trading at such an attractive growth-adjusted valuation.

What is the 12-Month Price Target for NVDA Stock?

Among the 40 analysts who’ve covered NVDA in the past three months, there’s hardly any room for doubt: 35 rate the stock as a Buy, while only four suggest Hold. Not a single analyst rates NVDA stock as a Sell. Currently, NVDA’s average stock price target is $173.57, implying a potential upside of 22% from the current share price.

See more NVDA analyst ratings

Nvidia’s Risks in Sight, Reward in Focus

Setting aside one-off events, Nvidia left the bears with almost nothing to complain about—crushing its own guidance and delivering a Q2 forecast that dispels doubts about how quickly gross margins are recovering.

While risks like evolving U.S. sanctions on China, Nvidia’s ability to maintain its presence in that market, and rising local competition are worth keeping an eye on, they don’t outweigh the current risk-reward of going long, especially given the company’s strong growth trajectory.