Nvidia: should you buy or sell poster child of the AI trade
It dominates the world of AI chips, but the share price has doubled since April. Analyst Rodney Hobson examines the investment case following recent quarterly results.
26th November 2025 08:10
by Rodney Hobson from interactive investor
Nervous investors mutter about inflated share prices for technology stocks; siren voices are still luring money into backing artificial intelligence (AI). These are times to be more alert than ever.
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NVIDIA Corp (NASDAQ:NVDA) has become the largest company in the world by stock market valuation, which is hardly surprising given that it is at the heart of the AI boom. Revenue in the third quarter was up 62% on a year earlier at $57 billion, clearly ahead of what had seemed to be inflated expectations. It means that the pace has picked up again since the second quarter rather than slowing further. Net income grew slightly faster with a gain of 65% year-on-year to $31.9 billion, again better than analysts had forecast.
For now, the gravy chain shows no signs of slowing. Nvidia reckons sales will reach $65 billion in the fourth quarter, give or take 2%, which beats existing analyst forecasts of $62 billion. Given the race-away success so far this year, it would be foolhardy to bet against the higher figure.
AI demands huge investment but then the rewards are also massive. Jensen Huang, co-founder and chief executive, said demand for Nvidia’s Blackwell advanced chips is “off the charts” and demand for computing power is still accelerating.
This has been quite a journey for Nvidia, which was set up only in 1993 and it became the first chipmaker worth $1 trillion just 30 years later. Now the boom in AI and the resultant demand for computer chips has since driven its valuation up to a remarkable $5 trillion.
The biggest customers are also giants in their own field, including Microsoft Corp (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN), Alphabet Inc Class A (NASDAQ:GOOGL) and Meta Platforms Inc Class A (NASDAQ:META), which all plan to increase their investment in AI infrastructure over the next 12 months. In addition, Nvidia has over the past few months signed deals worth billions of dollars with OpenAI, the maker of ChatGPT, and other rival tech groups to build data centres using Nvidia’s chips. Surging sales for Nvidia look certain to continue throughout 2026.
It is true that the financial performance has pushed the shares higher. Nvidia gained 4.2% on the day the latest results were released. At the current $178 the shares are up more than 30% over the past 12 months and are nearly double the level below $100 they sank to in early April. That may sound a hefty rise, but not in the context of the tech sector’s meteoric advance, and it leaves Nvidia’s price/earnings (PE) ratio at 45, again chunky but lower than others in the sector.
Source: interactive investor. Past performance is not a guide to future performance.
There is growing concern among investors that we could be witnessing another tech boom and bust similar to what happened at the Millenium, with once again companies buying each other’s products on a roundabout that everyone will sooner or later fall off. Indeed, Japanese conglomerate SoftBank has sold its entire stake in Nvidia for $5.8 billion in a move some have interpreted as a signal that the top of the market has been reached for publicly-owned companies heavily into AI, which demands very heavy capital investment.
The big difference this time compared with 25 years ago is that tech companies now have genuine products that are proven to work, genuine sales and genuine profits. Even if the bubble is burst there will be something tangible popping out.
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Hobson’s choice: Nvidia looks to be the best choice in the sector for investors looking to the longer term, or certainly to the next 12 months. Its comparatively lowly PE rating is a more reasonable measure of prospects for the immediate future and there is at least a tiny dividend, which shows more confidence than displayed by others in the field. Nvidia remains a leader in AI and is worth a buy rating. I last tipped the stock at $170 two months ago and since then it has been above $200, so there is some action for active traders as well.
Rodney Hobson is a freelance contributor and not a direct employee of interactive investor.
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