Nvidia mesmerizes markets: is it too early to doubt the AI bull market?

Nvidia has done it again: delivered an exceptional quarter and issued very strong guidance. The shares rose after results that beat Wall Street consensus and once again showed that, even with a market capitalization of around $5.5 trillion, the company is still growing at a pace that would not look out of place at a much smaller startup. There is only so many times one can write that Nvidia keeps publishing guidance that looks almost “absurdly strong,” only to beat it a few months later and raise the bar again for the next report. The remarkable part is that the company has been doing this consistently since 2023. Nvidia’s results and outlook seem to send a clear message: it may still be too early to doubt the bull market in AI-related stocks. Of course, no tree grows to the sky. But there is also no obvious alternative group of companies positioned to benefit from AI on a comparable scale to U.S. technology and semiconductor firms. And a technology boom of this magnitude may only come once.

Revenue grew by more than 100% year over year, Data Center revenue increased even faster, and guidance for $108 billion in revenue next quarter again came in clearly above market expectations. Management also suggests that the AI infrastructure boom is not slowing: purchase commitments are rising, Rubin infrastructure is entering production, and cloud partners are preparing millions of additional GPUs and gigawatts of new capacity. At the same time, the picture is not completely free of risks. Operating expenses are rising quickly, customer concentration remains high, and enormous purchase commitments will increasingly weigh on working capital in the coming quarters. Even so, it is difficult to argue that the fundamental AI story is starting to crack, because Nvidia’s demand, cash flow and profitability are still moving higher. That does not mean the share price has to rise without interruption or that the current valuation is cheap, but the results once again show that the market is not paying only for dreams.

The company’s net income rose by as much as 126% year over year, while gross margin held at 75%, virtually unchanged quarter over quarter despite the enormous scale of growth and around 2.5–2.6 percentage points higher than a year ago. That continues to point to a strong product mix and significant pricing power, even with competition already present and gradually becoming more visible. The key question is how long Nvidia can maintain such an exceptional growth rate before scale itself begins to work against it. Inventories rose from $21.4 billion to $31.6 billion, while receivables increased from $38.5 billion to $63.1 billion. If the pace of business expansion were to start slowing, these would likely be among the first places where signs of deteriorating quality would appear. But is that risk clearly visible or something investors should be worried about today? Not really. Data Center sales increased 117% to $89 billion, while hyperscaler revenue jumped nearly 29% quarter over quarter. That confirms that the largest cloud platforms are still aggressively expanding AI infrastructure, and Nvidia remains one of the most direct beneficiaries of those ambitions.

The strong report also looks like a degree of relief for the market after a nervous period. Recent weeks have been dominated by headlines and commentary suggesting that the AI rally is losing momentum and that capital is rotating away from semiconductors, perhaps for good. We do not know whether this particular report will be enough to restore investor confidence in AI infrastructure and trigger another wave of buying. What we do know is that if the world’s largest listed company is still able to grow its business by more than 100% year over year, it may be too early to declare the end of the technology bull market. Big Tech is still spending enormous sums on artificial intelligence, and it seems overly simplistic to argue that this is driven only by greed or competitive pressure. It may simply be that the technology giants understand what they are doing, and that trillions of dollars will continue flowing into the infrastructure companies underpinning the entire AI investment cycle and the expansion of global computing capacity over the next several years. Nvidia is unquestionably one of the major winners in that process, while a forward P/E of around 24 times expected 12-month earnings does not look extreme relative to the company’s current growth rate. The biggest risks to the continuation of the AI bull market may come instead from the broader economic cycle, yet even there it is difficult to find obvious signs of a collapse in global GDP growth or demand. In that sense, Nvidia has come through the Strait of Hormuz crisis with little fundamental damage and remains positioned to challenge new all-time highs in its share price, following the record-breaking trajectory of its business.

The final market reaction will be decided during tomorrow’s Wall Street session.

Eryk Szmyd Financial Markets Analyst, XTB