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QUICKTAKE

February 28, 2025

NVIDIA Results Reinforce AI Theme; Crypto Markets Slide after a Major Exchange Is Hacked

A volatile week for artificial intelligence and crypto investments appears to be ending on a relatively positive note—or at least showing some signs of stability.


NVIDIA (NVDA) earnings on Wednesday provided what we view as a positive read-across for the AI investment theme, although the shares subsequently came under pressure because of the profit margin outlook.


Meanwhile, Bitcoin and other crypto assets experienced heavy selling pressure this week after a $1.5 billion cyberattack on a foreign crypto exchange (more on that below).


Representing around 6% of the S&P 500 Index, NVDA is an important stock to track for many reasons, even if one is not directly invested in the shares.


NVDA is the critical supplier of technology enabling the AI data center buildout that is driving growth across the economy.  


It has been a few weeks since Chinese start-up DeepSeek caused the market to question the sustainability of AI-related investment.


NVDA’s revenue results, coming on the heels of reassuring capital spending announcements from several big tech companies, demonstrate the resilience of the AI investment theme.


This is positive for the stock market as a whole—and especially stocks that stand to benefit from the AI buildout.  

The idea that the next generation could have thousands times and even… millions of times more compute than today is in our future…. The next wave is coming, agentic AI for enterprise, physical AI for robotics and sovereign AI as different regions build out their AI for their own ecosystems. And so, each one of these are barely off the ground, and we can see them. - Jensen Huang, NVIDIA CEO (2/26/2025)

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Sustained growth


Trading at around 29 times estimated earnings per share for calendar year 2025, versus the S&P 500 Index at about 22 times, NVDA has a relatively high multiple.


This elevated earnings multiple is arguably justified if expected growth persists in the years ahead—but it also leads to a lot of sensitivity in the share price to even slight disappointments.


NVDA is no doubt an impressive company. Valuation concerns and other risk factors explain why we have not included the stock within our Model Portfolios—along with consideration of the fact that most investors already have substantial exposure via widely owned indices.


NVDA shares actually traded higher immediately after the earnings results were posted, as the company generally met expectations. Shares then drifted over the course of the week in response to concerns about potential downward pressure on its very high profit margins.


While analysts debate the margin outlook, revenue did not disappoint this quarter. As an indicator of broader market demand for AI, revenue is the most relevant metric.


The Data Center segment generated quarterly revenue of $35.6 billion, up 16% from the previous quarter and up 93% from a year ago. Full-year revenue in the segment rose 142% to a record $115.2 billion.

Data Center Revenue (Source: NVDA)

The company’s Data Center business was almost an afterthought just a few years ago, when NVDA was seen primarily as a technology provider to the video game industry.


The Data Center segment now represents nearly 90% of total company revenue.


As NVIDA’s business matures, it becomes more challenging to achieve high growth rates off of a larger base. Nonetheless, analysts generally expect greater than 50% growth in NVIDIA sales in the current fiscal year relative to the one just completed.


Commentary on the earnings call focused on strong take-up for NVDA’s next generation products, including its new Blackwell platform.


Analysts also probed CEO Jensen Huang about DeepSeek….


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