Nvidia (NASDAQ:NVDA) shares slipped about 4% today after a report that OpenAI fell short of its own user growth and revenue targets, raising questions about how sustainable near-term AI demand might be. The news rattled the broader chip space, with investors focusing on the possibility that slower expansion at one of the most important AI customers could ripple through massive computing agreements involving Nvidia and its peers.
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Forget margin or options. Here's how the pros trade NVDASo, is Nvidia’s strong growth trajectory now in danger? Its fiscal fourth-quarter results suggest otherwise, with revenue reaching $68.1 billion, up 73% year over year, alongside margins of 75%.
For investor Andres Veurink, the risk that hyperscaler capital spending would eventually normalize and weigh on future growth was enough to keep him on the sidelines. His view, however, has actually started to shift.
“My concerns are still there,” Veurink noted, “but NVDA seems to be able to tackle this, and the way their product portfolio is developing, I think they can rely on even more revenue streams going forward.”
While Nvidia’s GPUs are the company’s central revenue generator, it is the growing networking and software segments that have moved the needle for Veurink. The investor makes special mention of Nvidia’s Spectrum-X software, the company’s Ethernet platform that boosts AI efficiency and performance.
This is further entrenching Nvidia’s hold on the chips market, argues Veurink. The investor points out that Nvidia’s numerous software services make the choice to remain with Nvidia an obvious one.
“It makes little sense to use a different network platform than what the maker of the chips is providing,” Veurink added.
As for the potential market, Veurink notes that it’s no longer just the hyperscalers who are building data centers, as sovereign players have entered the scene. That eases his fears of customer concentration, and the investor calls governments one of the “most important growth areas” for the company.
“I was still on the fence about [how] to rate the stock,” Veurink concluded, “but I think I’m going to bite the bullet and rate it a Buy.” (To watch Veurink’s track record, click here)
Wall Street analysts, however, don’t need to bite any bullets to get there, with NVDA carrying a Strong Buy consensus rating. The average 12-month price target stands at $274.38, pointing to 29.5% upside from current levels. (See NVDA stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.