Investing.com – One of the most important events of the past week was the release of quarterly results in NVIDIA Corporation (NASDAQ:), a leader in AI chips but also an investor barometer when it comes to the theme of the AI investment itself.
After a mixed initial reaction, in the face of very strong results partly offset by forecasts considered cautious, Nvidia marked a new all-time intraday high at $152.89 last Thursday, after which the stock corrected by more than 3% on Friday.
Recall that revenue jumped 94% during the quarter to reach $35.1 billion, beating the consensus of $33.1 billion, and adjusted earnings per share (EPS) more than doubled , rising from $0.40 to $0.81, beating estimates of $0.75.
So, although the quarterly results did not give rise to the bullish explosion that some were hoping for, they confirmed the strength of Nvidia’s business, suggesting that the stock’s rise should continue, although it The rise is likely to slow from the nearly 200% gain recorded over the past 12 months.
Here’s why Nvidia stock should continue to rise
Indeed, several key factors continue to point to a bullish future for Nvidia.
First of all, it is important to know that Nvidia’s sales are limited by production constraints.
This is because demand for Nvidia chips exceeds supply, which is limited by Taiwan Semiconductor Manufacturing’s ability to produce its chips.
During the third-quarter earnings conference call, CFO Colette Kress called demand for the new Blackwell platform “staggering” and demand for the legacy Hopper platform “exceptional.”
Of the Blackwell platform, she added, “We are racing to scale the offering to meet the incredible demand that customers are placing on us,” and she predicted that demand for Blackwell would exceed supply for several quarters. during the 2026 financial year.
Furthermore, it should be noted that Wall Street remains mostly optimistic about Nvidia, with the latest published results having led to a series of target increases. The average analyst target for 12 months is $170.44, 20% higher than Friday’s closing price.
Another argument in favor of Nvidia is that its valuation is undoubtedly lower than what “traditional” ratios tell us.
Indeed, Nvidia currently trades at a price-to-earnings (P/E) ratio of 55, roughly double that of the S&P 500? However, the company’s growth is so rapid that tracking metrics aren’t really indicative of the situation.
The company reported adjusted earnings per share of $0.81 in the third quarter, and if we extrapolate this result over four quarters, we obtain a price-to-earnings ratio of 44. Furthermore, the consensus forecast is earnings of 4.31 dollars per share for the 2026 financial year, and we can deduce a forward price/earnings ratio of 34.
But that’s not all, Nvidia has made a habit of exceeding EPS estimates by 9% on average over the last 4 quarters. This suggests the company will produce EPS of at least $4.70 next year, or a forward price-to-earnings ratio of 31, almost on par with the broader market.
Will Nvidia be the first company to reach a capitalization of $4 trillion?
While the outlook remains bullish for Nvidia stock and its capitalization approaches $3.5 trillion, the next goal many investors have in mind is the $4 trillion mark.
However, it would be enough for the stock to gain 14% compared to its current prices to achieve this objective, which seems entirely possible by the end of the year.
However, it is important to emphasize that valuation models call for a certain caution.
Indeed, Nvidia’s InvestingPro Fair Value, which summarizes 14 models, is displayed at $120.85, or nearly 15% below the current price.
So, investors interested in tech stocks would do well to consider other opportunities as well. In this regard, InvestingPro’s ProPicks AI Tech Titans strategy, which displays a long-term performance of more than 2000%, could prove particularly relevant.
