Nvidia stock (NVDA) reached new heights in 2024, buoyed by demand for its artificial intelligence (AI)-enabling graphics processing units (GPUs). With a commanding share in the AI accelerator market, some analysts argue that any upside is already priced in. However, investors should consider Nvidia’s position in disruptive technologies, notably robotics. I’m still bullish on Nvidia due to its strong cash reserves, technological lead, and opportunities to dominate in new sectors.
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Nvidia’s Robot Wars
One reason for my bullishness centers around future technological developments — namely robotics — and Nvidia’s position within this market. Nvidia’s opportunity to dominate the robotics industry is significant, driven by the convergence of powerful AI algorithms, high-performance computing, and advanced sensors.
Nvidia’s strategy leverages three critical components:
Omniverse: A powerful simulation platform that enables the creation of high-fidelity “digital twins” for robotic experimentation.
High-end GPUs: Cutting-edge hardware like the Blackwell architecture provides the necessary computational power for AI and robotics applications.
Foundation Models: Large-scale AI architectures optimized for multi-step reasoning and cross-domain capabilities.
This ecosystem allows Nvidia to simulate, test, and validate robotics applications at scale, significantly accelerating development and reducing costs. It also has several advantages over robotics peers like Tesla (TSLA), with analysts pointing to Nvidia’s advanced internet-scale data handling, simulation capabilities in the form of the Omniverse platform, and its hardware-software synergy.
Nvidia Is Enabling the AI Revolution
Interestingly, it’s Nvidia’s enabling of the AI revolution that makes robotics much more of a reality in the very near future. And while estimates vary, the AI robotics market is poised for significant growth. Goldman Sachs projects the humanoid robotics market to reach $38 billion by 2035, while more bullish estimates from Ark Invest suggest a potential $24+ trillion global revenue opportunity by the 2030s.
In short, the company’s approach of combining powerful hardware, advanced simulation capabilities, and a robust AI ecosystem provides it with a favorable position for growth in the AI robotics market. Moreover, when coupled with Nvidia’s impressive cash flows and financial reserves, it’s not hard to see how Nvidia could dominate.
Nvidia’s Foundations for Future Successes
Furthermore, my bullishness is compounded by the company’s financial strength. Nvidia’s impressive quarterly revenue of $35 billion, up 94% year-over-year, and free cash flow of $14.9 billion demonstrates its strong market position and financial health. This financial strength means that Nvidia can comfortably make substantial investments in long-term research and development, strategic acquisitions, and support for developers on its platform.
Nvidia is actually taking a collaborative approach to robotics by partnering with multiple robotics firms rather than focusing solely on developing its own humanoid robots. This allows Nvidia to leverage its hardware-software ecosystem efficiently without spending vast sums of money on single projects, which still have high execution risk. For example, the tech giant’s partnership with Figure, a leading humanoid robotics company, sees Nvidia’s Omniverse Isaac Sim utilized for synthetic data generation.
AI models are trained on Nvidia’s GPU, and real-time inferencing is run on Nvidia’s accelerated computing modules. Interestingly, the future of robotics is rapidly approaching, with Nvidia set to launch its “Jetson Thor” computing platform in the first half of 2025. This advanced platform will provide the essential processing power needed to bring sophisticated humanoid robots to life, marking a significant leap forward in robotic capabilities.
Nvidia’s Valuation Remains Justifiable
The core justification for my bullishness is undoubtedly the company’s growth-adjusted valuation. The company’s forward price-to-earnings (P/E) ratio of 46.8x for January 2025 is significantly lower than its P/E of 106x for January 2024 (when using current prices), indicating strong expected earnings growth. This is supported by analysts’ projections of a 127.9% EPS growth rate for fiscal year 2025, followed by 50% in 2026.
Given this extraordinary growth rate, Nvidia’s price-to-earnings-to-growth (PEG) ratio of 1.19 (non-GAAP forward) is attractively 34.1% lower than the sector median, suggesting that its growth potential may not be fully priced in. This PEG ratio is also 38% lower than Nvidia’s five-year average.
While Nvidia’s valuation metrics are generally higher than the sector median (its forward P/E of 46.8x is 81.9% higher than the sector median of 25x), the firm’s superior growth rates and dominant position in AI chips justify the premium.
Is Nvidia Stock a Buy, According to Analysts?
On TipRanks, NVDA comes in as a Strong Buy based on 37 Buys, three Holds, and zero Sells assigned by analysts in the past three months. The average NVDA stock price target is $177.08, implying about 17% upside potential.
I’m bullish on Nvidia stock for several reasons, including the fact that its dominance in AI hardware and software positions it well to capitalize on the emerging robotics market. With $38.5 billion in cash reserves, Nvidia has ample resources to invest in R&D and strategic acquisitions. Moreover, the company’s collaborative approach, leveraging partnerships rather than building everything in-house, allows for efficient ecosystem expansion.
From a valuation perspective, Nvidia’s forward P/E of 46.8x and PEG ratio of 1.19 suggest its growth potential isn’t fully priced in despite the stock’s strong performance. And with a strong buy rating from analysts, there’s a lot of support to suggest that the stock could push higher.
