We came across a bullish thesis on NVIDIA Corporation (NVDA) on Substack by Compounding Your Wealth. In this article, we will summarize the bulls’ thesis on NVDA. NVIDIA Corporation (NVDA)’s share was trading at $110.93 as of April 11th. NVDA’s trailing and forward P/E were 37.73 and 24.75 respectively according to Yahoo Finance.
Photo by Christian Wiediger on Unsplash
NVIDIA Corporation has solidified its position as the undisputed leader in the AI and accelerated computing space, emerging as one of the most transformative forces in modern technology. With a staggering market cap of over $2.3 trillion and annual revenue of $130.5 billion as of April 2025, NVIDIA’s dominance is driven primarily by its Data Center segment, which now comprises 88% of its total revenue. This segment is home to NVIDIA’s flagship AI chips—like the H100 and A100—and broader AI platform, including CUDA, DGX Cloud, and AI Enterprise, which together fuel nearly every major hyperscaler globally. Though its revenue growth has slowed from the meteoric 427% YoY in Q1 2024 to 93% in Q4, the Data Center business remains the centerpiece of the investment thesis, commanding a 95% share of the AI accelerator market and 80%+ of the overall GPU market. Its proprietary CUDA ecosystem creates high customer lock-in and supports a durable competitive moat underpinned by intellectual property, scale, and trusted brand equity. NVIDIA’s total addressable market is expanding rapidly, with the data center opportunity forecasted to hit $1 trillion by 2028 and $1.7 trillion by 2035, while its entry into CPUs adds $35 billion in TAM, and the gaming GPU market is expected to grow at a 21% CAGR through 2028.
Despite this dominance, signs of deceleration are starting to appear. Q4 2024’s revenue beat of 4.9% was the lowest in two years, and free cash flow margin dropped from 50.7% to 39.5%, raising questions about how NVIDIA will sustain momentum as the AI cycle matures and competition intensifies. Nonetheless, analysts still expect robust top-line growth of 59.1% in 2025 and 24.6% in 2026, hinging on the company’s ability to stabilize its Data Center business while pushing into new markets like automotive and robotics. Gaming, which still brings in $11.35 billion, remains a key pillar, while high-margin AI GPUs have enabled NVIDIA to maintain a non-GAAP gross margin of 75.7% and net margin of 56%, despite recent compression.
Operationally, NVIDIA remains lean and disciplined. R&D makes up 9% of revenue—exceeding SG&A—which sits at just 2%, highlighting a focused strategy around innovation. The company boasts a fortress-like balance sheet with $43.2 billion in cash against $10.3 billion in debt, giving it ample flexibility for strategic reinvestment and shareholder returns. Capital allocation remains shareholder-friendly, with $8.1 billion returned through buybacks and dividends last quarter, while share count declined 0.7% and stock-based compensation fell to 3% of revenue.
Valuation, once a concern, has come back down to earth. A forward P/E of 25.2 and EV/Sales of 13.5 reflect a significantly de-risked entry point, and a 2026 PEG ratio of 0.9 suggests the stock may be undervalued relative to its growth outlook. Even with gross margin compression and free cash flow headwinds, NVIDIA’s structural leadership in AI hardware, unmatched software ecosystem, and deep innovation pipeline position it for continued long-term outperformance. For investors, the current setup presents a rare mix of resilience, growth, and valuation support, making NVIDIA an exceptional risk/reward opportunity as the next era of AI adoption unfolds.
NVIDIA Corporation (NVDA) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 223 hedge fund portfolios held NVDA at the end of the fourth quarter which was 193 in the previous quarter. While we acknowledge the risk and potential of NVDA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.