As we approach the release of its Q2 report, the burning question remains: Can NVIDIA (NVDA) sustain its growth momentum? I believe the answer is yes, so I am bullish on NVDA stock.
The company has been on a fantastic growth trajectory, breaking one quarterly record after another. In the four quarters leading up to its most recent Q1 results for fiscal 2025, NVIDIA’s revenues surged by an astounding 102%, 203%, 266%, and 262%, respectively. This explosive growth has been the driving force behind NVIDIA’s soaring stock price, which has kept investors and analysts on the edge of their seats and the bullish sentiment for its stock.
Riding Q1’s Momentum into Q2
Before we look at what the market expects for NVIDIA’s upcoming Q2 results, let’s review its Q1 results to understand its current momentum and the catalysts driving its wild growth.
NVIDIA’s Q1 was nothing short of spectacular. The company reported revenue of $26 billion, up 18% sequentially and a staggering 262% year-over-year. Impressively, this result exceeded the company’s outlook of $24 billion. The primary driver of this growth was the Data Center segment, which accounted for $22.6 billion of the total revenue – a 427% increase year-over-year and a 23% sequential rise.
The AI Boom
NVIDIA’s success is, of course, closely tied to the ongoing AI revolution. Its GPUs have become the gold standard for training and inferencing large language models (LLMs) like OpenAI’s GPT and Meta’s (META) Llama 3, among others. Cloud providers have been rapidly deploying NVIDIA AI infrastructure, driving a significant portion of the company’s Data Center revenue.
In Q1 alone, inference drove approximately 40% of NVIDIA’s Data Center revenue, stressing the increasing demand for AI computing power. One such standout example from Q1 was Tesla’s (TSLA) expansion of its AI training cluster to 35,000 H100 GPUs. As Colette Kress, NVIDIA’s Executive Vice President and CFO, explained during the post-earnings call, this infrastructure is critical for developing Tesla’s autonomous driving software.
This again highlights the importance of NVIDIA’s AI solutions across various industries. Likewise, Meta’s Llama 3, trained on 24,000 H100 GPUs, drives AI assistants across Facebook, Instagram, WhatsApp, and Messenger. This shows how NVIDIA is becoming increasingly integral to Meta’s operations.
Sovereign AI
Sovereign AI is a prime example of why I think Nvidia can sustain its growing momentum. In Q1, NVDA continued to benefit from the global push toward Sovereign AI, a trend expected to carry over to Q2. Sovereign AI means countries build domestic AI infrastructure to reduce reliance on foreign technology. For instance, Japan is investing over $740 million in critical digital infrastructure providers to build its Sovereign AI capabilities. Europe is also seeing similar investments.
NVIDIA’s full-stack solutions, from computing to networking, make it an ideal partner for these national AI ambitions. This explains why the company estimates Sovereign AI could generate high single-digit billion-dollar revenues this year.
Outlook for Q2
Entering Q2 assessments, the company predicts a 107% year-over-year revenue increase. If this estimate is achieved, it will be enough to sustain the bullish sentiment on the stock. A triple-digit growth rate can justify the stock’s forward P/E of about 41, even if growth slows down massively in the coming years, which is debatable.
More so, NVDA stock has soared approximately 163% over the past year, so all eyes are now on Q2 to see if this extraordinary momentum can continue. From its own perspective, NVIDIA expects to post revenues of $28 billion, plus or minus 2%, with sequential growth across all market platforms. Gross margins are expected to remain strong, in the mid-70s percent range.
I would like to emphasize that NVIDIA’s estimates may be overly conservative. As I noted, the company surpassed its Q1 forecast by $2 billion, a significant margin. Also, the pace of the AI revolution is so rapid that it’s possible neither NVIDIA nor the market can fully anticipate its impact. For example, Wall Street’s revenue estimate for NVIDIA’s Q2 currently stands at $28.64 billion, slightly above NVIDIA’s projection of $28 billion, with expectations for an easy beat.
To put this in perspective, at this time last year, the market anticipated sales of only $19.69 billion for this very same quarter. This shows how both forward estimates can rapidly adjust, potentially upwards, in response to the industry’s swift expansion.
Is NVDA Stock a Buy, According to Analysts?
Wall Street’s sentiment on NVIDIA appears exceedingly bullish despite the stock’s lengthy rally over the past year. NVDA stock has a Strong consensus rating, reflecting a combination of 37 Buy and four Hold recommendations over the past three months. At an average price target of $144.17, the average NVDA stock price target implies 11.44% upside potential.
If you’re uncertain which analyst to follow for trading NVDA stock, J.P. Morgan (JPM) analyst Harlan Sur, a five-star analyst according to Tipranks’ ratings, stands out as the most accurate choice over the past year. With an average return of 111.17% per rating and a success rate of 97%, Cook’s insights could be highly valuable.
Takeaway
NVIDIA has exhibited explosive growth in recent quarters, driven by its dominance in AI and Data Center solutions. As its Q2 results approach, expectations remain high for continued strong performance, with the company projecting triple-digit revenue growth to $28 billion. However, given NVIDIA’s track record of exceeding forecasts and the accelerating relevance of AI, the company’s actual growth could be even more impressive. Accordingly, I believe that the ongoing optimism around NVDA stock remains well-justified. Therefore, I remain bullish on NVDA stock.
