Nvidia (NASDAQ:NVDA) stock has staged a remarkable comeback, surging 30% over the last month. This includes a 5% jump in post-market trading on Wednesday 28 May. This followed the company’s first-quarter results comfortably beat Wall Street expectations.
The rally comes at a pivotal time for the chipmaker. The US company’s navigating both exceptional demand for artificial intelligence (AI) infrastructure and persistent geopolitical challenges, particularly around US-China trade restrictions.
More impressive results
Stocks typically move the most after reporting on quarterly or annual — depending on the time of the year — results. And the catalyst for the latest surge was Nvidia’s first-quarter earnings report, released after the market closed on 28 May.
The company posted adjusted earnings per share of $0.81, surpassing consensus estimates by $0.06. Revenue was reported at $44.06bn, which was $800m ahead of forecasts. These results were driven primarily by continued growth in Nvidia’s data centre segment. Here, revenue leaped 73% year on year to $39.1bn.
The company’s ability to outperform expectations, even as it absorbed a $4.5bn charge from US export restrictions on AI chips to China, reassured investors and sparked a wave of buying in after-hours trading.
AI dominance unchallenged
Nvidia’s leadership in AI hardware remains unchallenged. The company now commands around 90% of the data center GPU market, cementing its role at the heart of the global AI boom. Demand for Nvidia’s AI infrastructure is described by CEO Jensen Huang as “incredibly strong,” with AI inference workloads having grown tenfold in just a year.
Major cloud providers — including Microsoft, Amazon, and Meta — continue to invest heavily in Nvidia’s technology, countering earlier fears of a slowdown in AI spending. This incredible demand has been a key driver behind the stock’s 30% rebound over the past month, and analysts remain bullish on Nvidia’s prospects despite the company’s own guidance for a slightly softer second quarter.
Geopolitics can weigh on performance
While US export restrictions have certainly weighed on Nvidia’s China business. China now accounting for just 12.5% of revenue. That’s down from about 15% in previous quarters. The impact has been less severe than initially feared.
The company has managed to repurpose some chips originally intended for China, mitigating the worst of the financial hit. Moreover, the broader market has been buoyed by signs of easing trade tensions, notably a 90-day pause on tariffs between the US and China.
However, I do think investors should recognise the uncertainty here. Trump’s trade policy is still under development and it’s entirely possible that Nvidia could face more challenges if things don’t work out. There’s also some concern that China may create self-reliance in terms of AI chips — that wouldn’t be great for Nvidia or other US chipmakers.
An undemanding proposition
Nvidia stock trades around 32 times forward earnings and has a price-to-earnings-to-growth (PEG) ratio of 0.92. I’d suggest this isn’t particularly demanding. I’m also excited about Nvidia’s long-term prospects in robotics and as the builder of “AI factories”. I recently doubled down on my Nvidia investment, and I believe, even now after a 30% rise in one month, it still deserves consideration. The average share price target is $164, suggesting more growth is coming.
