Prediction:Analysis of Core Reasons Why NVIDIA Stock Will Outperform the Market

Analysis of Core Reasons Why NVIDIA Stock Will Outperform the Market

1. Explosive Growth in AI and Data Center Business (Primary Driver)

1. Exponential Expansion of Data Center Business
   According to October 2024 data, NVIDIA’s data center revenue surged from $3 billion in FY2020 to $47.5 billion in FY2024, with projections reaching $111 billion in FY2025, reflecting a 3-year CAGR of 23%. The increased production capacity of Blackwell architecture chips and the launch of next-gen products like the H200 and B300 will further solidify its dominance in AI training and inference markets. Analysts predict that data center revenue will account for over 90% of total revenue by 2025.
2. Irreplaceability of AI Computing Power
   NVIDIA’s GPUs hold over 90% market share in large language model (LLM) training, and the high switching costs of its CUDA ecosystem create a formidable technological moat. Even with in-house chip development by tech giants like Microsoft and Google, NVIDIA’s leadership remains unchallenged in the near term. The global data center accelerator market is projected to grow from $45 billion in 2023 to $400 billion by 2027 (70% CAGR), with NVIDIA poised to capture the largest share.

2. Superior Financial Metrics and Operational Efficiency

1. Consistently Strengthening Profitability
   • Gross margin rose from 57% in FY2023 to 73% in FY2024, with FY2025 forecasts at 75%;
   • Operating margin increased from 54% in FY2024 to an estimated 62% in FY2025, stabilizing above 60% long-term;
   • The Q3 2025financial report showed adjusted EPS of $0.81 (expected $0.74) and revenue of $35.1 billion (expected $33.25 billion), exceeding expectations and driving the stock price to rise against the trend
2. R&D Investment and Product Innovation
   NVIDIA spent 20% of revenue on R&D in 2024, far exceeding industry averages. The Blackwell architecture boosts AI training efficiency by 30x and slashes inference costs by 25x, maintaining a 12–18-month technological lead over competitors.

3. Diversified Business and Emerging Growth Areas

1. Resilience in Gaming and Professional Visualization
   Gaming revenue is projected to hit $11.8 billion in FY2025 (+10% YoY), while professional visualization solutions continue penetrating sectors like healthcare and architecture, providing stable cash flow.
2. Automotive and Robotics Potential
   Automotive revenue is forecast to reach $1.4 billion in FY2025, with a 20% CAGR over the next decade. Partnerships with Tesla, BYD, and other automakers will unlock long-term value.

4. Market Expectations and Valuation Rationality

1. Analyst Consensus and Price Targets
   28 out of 30 Wall Street analysts gave a “buy” rating, with an average target price of $180.76 (up to $220) and an implied increase of about 50%. Even conservatively estimated, the 81% growth rate of data center business in 2025 is sufficient to support the current valuation
2. Attractive Valuation Multiples
   Current P/E ratio of 37.89x (April 2025) remains below its 5-year pre-ChatGPT average of 40x. Based on FY2025 EPS estimates of $4.50, the forward P/E is just 25x—well below peers in high-growth tech.

5. Mitigated Risk Factors

1. Optimized Supply Chain and Inventory
   Inventory turnover days dropped from 90 to 65 in 2024, with TSMC’s 3nm capacity ensuring stable supply.
2. Geopolitical Risk Management
   Compliance-focused chips like A800/H800 have revived China sales, with regional revenue rebounding to 15% of total in Q1 2025.

6. Market Context vs. Nasdaq Index

1. Tech Leadership in Bull Markets
   NVIDIA surged 12% in April 2025 vs. Nasdaq’s 5.6% gain, doubling the index’s performance. As the “picks and shovels” provider for AI, it offers stronger cyclical resilience.
2. Relative Strength in Volatility
   Even during Nasdaq’s 5.97% single-day plunge in April 2025, NVIDIA rose 5% post-earnings, proving its earnings-driven fundamentals.

Conclusion: Multi-Dimensional Advantages Support Long-Term Outperformance

NVIDIA’s dominance in AI infrastructure, relentless innovation, stellar financials, and market optimism underpin its outperformance thesis. Despite competition and valuation risks, key factors—

• 23% CAGR for data center revenue (2025–2028)
• 74.56% gross margin moat
• 30%+ annualized return potential per analysts
  —position NVIDIA as a core holding in tech portfolios for the next 3–5 years. Monitor Blackwell chip production, AI model scaling, and national AI investment policies as key catalysts.