Nvidia (NVDA), already the globe’s largest company at a $4.4 trillion valuation, has become the operationally most efficient of the so-called “Magnificent 7” stocks. In recent studies from BestBrokers.com, Nvidia’s operating margin was an astonishing 59.86% during its last four quarters, well ahead of peers like Tesla (TSLA), Microsoft (MSFT), and Meta (META). Such a level of profitability highlights how well-positioned Nvidia is at the forefront of the artificial intelligence (AI) explosion and how dominant it is in high-end GPUs for AI, gaming, and data centers.
The broad tech universe has seen spotty margin trends, where artificial-intelligence leaders have expanded their profit margins and hardware-based counterparts seen compression. The effectiveness of Nvidia sets it apart from not only peers but all of its Nasdaq majors, where averages are much lower. Investor conundrum: With NVDA around all-time highs, is its extraordinary effectiveness already priced in – or does the stock have further to run?
Nvidia is a world-leading company in accelerated computing and AI infrastructure, based in Santa Clara, California. The company develops GPUs, data center platforms, and AI software that are deployed across markets, ranging from autonomous vehicles through generative AI. With a $4.4 trillion market cap, Nvidia dominates the semiconductor and AI tech industry, providing key hardware and software ecosystems.
Shares of NVDA gained significantly over the past year, surging from an all-time 52-week low of $86.62 to a high of $184.48, a better-than 100% gain. That action handily beat out the S&P 500’s (SPY) about 25% gain during this same time period, which is a reflection of investors’ enthusiasm for growth being fueled by AI.
From a valuation point of view, Nvidia is priced at 45.40 times forward earnings and 34.16 times sales, much higher than industry averages in the semiconductor sector. Even though multiples this high would normally be seen to reflect a premium, this valuation is justified through its 55.85% net profit margin and return on equity in excess of 105%. Despite this, investors are paying for quality and scalability in a world where Nvidia enjoys a near-monopoly position in high-end AI chips.
