Nvidia Continues to See Unstoppable Growth, but Is the Stock Still a Buy?

A glance at its fiscal 2025 fourth-quarter report shows Nvidia (NASDAQ: NVDA) once again showed remarkable growth. The demand for its graphics processing units (GPUs) remains insatiable. The company's semiconductor chips have become the backbone of the artificial intelligence (AI) infrastructure build-out, which continues to show no signs of slowing down.

Despite the strong report, the stock was unable to get a nice bounce and it trades down about 10.5% year to date. Still, the stock has been on a tremendous run the past five years, up an astounding 1,810% over the past five years, as of this writing.

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Let's take a closer look at Nvidia's results and see if the stock can regain its momentum.

Rapid growth continues

For the second consecutive year, Nvidia was able to more than double its revenue, which is an astonishing feat for a company its size. Revenue rose 114% to $130.5 billion in its fiscal 2025 (which ended Jan. 26) on top of 126% revenue growth the year before.

For fiscal Q4, revenue soared 78% year over year to $39.3 billion, once again powered by AI demand. Its adjusted earnings per share (EPS) climbed 71% to $0.89. Adjusted EPS grew slower than revenue as its gross margin slipped 300 basis points to 73%. Nonetheless, the results surpassed analyst expectations for adjusted EPS of $0.84 on revenue of $38.1 billion.

Its data center business once again led the way, with revenue surging 93% year over year to $35.6 billion. The company said the growth was led by its H200 Hopper chip, while its next-generation Blackwell GPU architecture exceeded expectations with revenue of about $11 billion. While Nvidia is known for its chips' superior performance in training AI models, it said its inference demand was accelerating, while noting that Blackwell was designed for reasoning AI inference.

Much of Nvidia's revenue continues to come from large cloud computing providers, which made up about half of Nvidia's data center revenue in the quarter; however, it said regional cloud providers increased as a percentage of data center revenue. Meanwhile, its consumer internet revenue, which includes customers such as Meta Platforms and Elon Musk's xAI, tripled. Enterprise revenue doubled, with Nvidia saying that its platform is being adopted by organizations across industries. It said its solutions are being used for such things as autonomous driving, fraud detention, and drug discovery.

Nvidia's other segments were mixed. Gaming revenue sank 11% to $2.5 billion, as Q4 shipments were impacted by supply constraints. Professional visualization revenue increased 10% to $511 million, while automotive and robotics revenue more than doubled to $570 million.

The company continues to be a cash-flow machine, generating operating cash flow of $16.6 billion and free cash flow of $15.6 billion in the quarter. Nvidia ended the year with net cash and marketable securities of $43.2 billion and $8.5 billion in debt. It announced it will begin paying a modest $0.01 quarterly dividend next quarter.

Nvidia projected fiscal Q1 revenue to be around $43 billion, which would represent growth of approximately 65% year over year. The growth will be led by its new Blackwell GPU architecture. However, it is looking for its gross margin to come in at 70.6%, down from 78.4% a year ago. It expects the gross margin to improve throughout the year as Blackwell scales and efficiencies are gained, reaching the mid-70% range.

Meanwhile, the company is looking to launch its new Ultra GPU architecture in the second half of 2025.

Image source: Getty Images.

Is Nvidia stock a buy?

Nvidia's stock remains inexpensive given its growth, with a forward price-to-earnings (P/E) ratio of just over 28 times this year's analyst estimates and a price/earnings-to-growth (PEG) ratio of under 0.5. PEG ratios below 1 typically indicate a stock is undervalued.

NVDA PE Ratio (Forward) data by YCharts

Meanwhile, Nvidia continues to be the biggest winner of AI infrastructure growth. Companies continue to pour money into AI infrastructure as evidenced by the announced capital expenditure (capex) budgets from the big three cloud computing companies (over $250 million combined) as well as Meta Platforms, which is looking to spend up to $65 billion in AI-related capex. In addition, a consortium of companies led by Japan's SoftBank and OpenAI are set to spend $500 billion on AI infrastructure in the next few years in the U.S. as part of Project Stargate.

That's a lot of AI infrastructure spending that Nvidia is set to benefit from this year. That said, Nvidia doesn't have a recurring-revenue business model like a software company and the semiconductor business can be cyclical. Where AI infrastructure spending trends over the next five to 10 years will go a long way in determining whether the stock is a good long-term investment.

Right now, though, Nvidia looks to be in a very good position for this year while trading at an attractive valuation, making it a buy at current levels.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Geoffrey Seiler 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.