Nvidia Corp. has seen its stock surge by more than 45% since its low in April, marking a major rebound worth $1 trillion in just two months. This rally has helped push Nvidia’s market value to $3.4 trillion, just shy of Microsoft, the world’s most valuable company. The growth comes as investor optimism shifts away from previous concerns about U.S. trade restrictions on advanced semiconductors and the company’s ability to meet the growing demand for AI infrastructure.
Investor Confidence Soars Post-Earnings Report
Last week’s earnings report addressed key investor concerns, particularly regarding U.S. restrictions on semiconductor sales to China. Nvidia’s ability to ramp up production of its newest Blackwell chips also reassured the market. “Those questions have been answered in the positive for Nvidia,” said Thomas Martin, senior portfolio manager at Globalt Investments. “It’s time to ramp back up your ownership,” he added, emphasizing the company’s promising future in the AI space.
Trade Tensions and U.S. Tariffs Still Loom
Despite its impressive growth, Nvidia still faces the ongoing risk of U.S. tariffs, as its chips are manufactured overseas and heavily dependent on trade relations, particularly with China. The company’s revenue from China accounted for 13% in the first quarter, and potential worsening of trade relations could impact Nvidia’s operations. However, partnerships with governments in the Middle East and a strong product pipeline could help mitigate some of these risks.
AI Spending Continues to Drive Demand
With AI infrastructure investment booming, Nvidia’s major clients, including Microsoft, Meta, Alphabet, and Amazon, remain committed to expanding their AI capabilities. These companies are projected to spend approximately $330 billion in capital expenditures by 2026, reinforcing the demand for Nvidia’s products. “We just haven’t seen any kind of slowdown in AI spending,” said Samuel Rines, a macro strategist at WisdomTree. “As long as capex keeps moving up, Nvidia’s growth trajectory looks strong,” he added.
Valuation and Market Position
Despite the recent surge in stock price, Nvidia remains undervalued compared to its peers. The company’s projected price-to-earnings ratio stands at 29, lower than the Nasdaq 100’s 26. Nvidia’s lower PEG ratio also highlights the potential for further price appreciation. Analysts are generally bullish on the stock, with most recommending a buy. The average price target is around $170, representing a 24% potential upside from the current price.
Growth Potential Amid Market Uncertainty
While Nvidia remains under-owned by market professionals compared to other Big Tech giants, the growing demand for computing infrastructure is expected to propel the stock even higher into 2026. As Angelo Zino, senior equity analyst at CFRA Research, noted, “There were a lot of investors that really got out of this market prematurely, and now they’re being forced back into it.”