Nvidia Stock Surges on Supply-Driven Growth Amid Financing Questions
Nvidia's stock has surged 19% this year, reaching $225 on September 25. Despite this impressive gain, the company's price-to-earnings multiple has compressed by 25.8% over the past year.
This divergence between earnings and share price is notable, as Nvidia's adjusted EPS grew 59.5% over the same period. The Q2 call revealed that revenue more than doubled YoY to $96 billion, with a preliminary target of 70% revenue growth for fiscal 2028 due to supply constraints.
Nvidia CFO Colette Kress attributed this bottleneck to wafers, memory, and power limitations, which will persist through the end of the year. As a result, the company has adjusted its gross margin guidance, expecting a trough of 71% to 72% in Q4 before recovering to 72% to 73% in fiscal 2028.
TIKR's mid-case model values Nvidia stock at $661 by January 2031, implying a 194% total return or 28% annualized. This estimate takes into account the company's financing of AI labs, which skeptics argue may be subject to circular financing and expectations of continuously accelerating revenue growth.