This Is Why Nvidia Is My #1 Stock to Buy

Ladies and gentlemen, I believe I just saw the best earnings release I've ever seen in my 10 years of covering stocks. This is Nvidia's Q1 earnings review. I'm going deep into the fundamentals. We're talking about growth, profitability, guidance, their actual products. It's unbelievable what they just ended up showing off. But let's jump in. First up, we have to talk about their actual growth. And what we ended up seeing was topline revenue growth brought in $81.6 6 billion or an increase in growth year-over-year to 85.23%. Now, the next quarter is likely to be even higher than this because of this decrease in growth rate before making the comp a little bit easier. As time goes on after into Q3, the growth rate might start to have a harder time growing. But if we take a look ahead, this is my belief for Q2 of their fiscal 2027 or essentially Q2 of 2026 for every other company. What we end up seeing is that if they get to $93.5 billion, which is right in range with what they're calling for on guidance, which is a little bit like 91 million, but last quarter they said 78 million, then they beat that by over $3 billion. So if they beat by just a few billion dollars more, we'll end up seeing this number, bringing their growth rate up to 100% yearover-year. You're talking about the largest company in the world, a $5.7 trillion business growing topline growth by 100% year-over-year. The interesting part about this growth is that it's very one-dimensional. This is coming from data center growth. Now, I shouldn't say one-dimensional. We'll break down the data center growth a little bit even more but for now these are the two categories that they're talking about data center and then what they are calling edge computing which is essentially everything else. So you're talking about robotics physical AI right gaming all their other segments whenever we look further into data center revenue it breaks down even further into actual data center computing revenue and then data center networking revenue. Networking revenue grew up to $15 billion, nearly tripling year-over-year, while the actual computing side grew by 77% year-over-year. Nvidia recently opened up their networking revenue called Envy Link Fusion, which essentially allows you to use other chips like TPUs and these sort of things where their networking side of the business will work with other chips, not just purely Nvidia chips. And those companies pay for that privilege. Regardless, gross profit stayed very, very high at 75% margins. But with that topline growth led us to 61 billion of gross profit, up from 51 billion just a quarter before. Year-over-year, we're looking at 26 billion up to 61 billion. An unbelievable increase in profitability. But then whenever we go and look at their expenses to try to get their operating income, so we need to look at their operating expenses, we see selling general and administrative expenses growing roughly around 25%. whereas their actual research and development expenses are growing much much faster than this in the high 50 percentage marks and they believe it's going to stay in this 50% plus range because they're trying to stay ahead of the game. That being said, although R&D expenses are growing, whenever we actually take a look at what this represents as a percentage of revenue, it's still is going down now at 7.7% of overall revenue for Nvidia and SGNA is down to 1.5%. Meaning that operating expenses are getting even better as a percentage of revenue and stock-based compensation as a percentage of revenue is now down to 2.3%. So this leads us more into profitability. Operating profit hit a new high not only in terms of the total number $53.5 billion but the margin is now at a new company high. So that is breaking records. This leads to a rule of 40 of 152%. the best companies in the world. I mean, you have three, four companies that ever hit this. Nvidia is maintaining a 150% rule of 40 even though they've been on this growth rate for a long time now. And flowing all the way down to the bottom line, we have net income. This is after they've paid their taxes. This is after they've got nonoperating income. We end up seeing a net income margin of 71.5%. Now, don't expect this to maintain this extremely high percentage. we can expect a high probably around 60 plus% because of nonoperating income meaning essentially what their investments are leading to and a mark-to-market gain on those investments. Meaning that if they invested $5 billion into Intel at $2328, well, the investment has done very well since they've invested. $5 billion back at that price to today is well quite great. Now, I want to make this clear. This investment, the way that it's being shown off for Nvidia is just Q1 numbers. So, it's what the price was here and what the price was at the end of the quarter. Into Q2, Intel has continued to grow another 26.5% as of the time of recording this video. And so, we expect this growth to continue into next quarter. And this is only one of their investments. But in Q1, what we ended up seeing is that from the start of the quarter to whenever the reporting period was done, Intel essentially 2xed or 103% gain in that reporting time frame. And this is what their marktomarket investment gains look like. They made essentially $13.4 billion of unrealized gains on publicly held equities with another $2.6 billion of unrealized gains on non-marketable or private equities. Those non-marketable or private equities are probably something like Nscale or OpenAI. But on the public side, we have a lot of companies. We've got Intel doing very well. Coreweave, Nebius, Marll Nokia Coherent Lumenum Synapsis, and Corning, which are all green since their initial investments. If the bull market continues, companies like Coree and Intel that they have massive investments in, if those companies do well, that's going to lead to massive, you know, nonoperating income gains. By the way, that's not to suggest that free cash flow is not also doing well. Nvidia just put up the second highest free cash flow quarter ever in history. The only company ever to beat this was actually Apple. But it looks like next quarter, if Nvidia ends up putting up that $93.5 billion, which is what we're expecting, that they will actually break the mark for the most profitable free cash flow quarter ever in history. The reason why they're able to do so well on free cash flow in companies like Google, Microsoft, Meta, and all of these businesses that also should have a lot of free cash flow is because of those expenses in capital expenditure. Meaning, how much are you reinvesting into property and equipment for the future? And Nvidia is essentially although they're a chip designer, they're not necessarily a chip manufacturer. That's more like TSMC for example. And so Nvidia's entire business is sending those files over to TSMC and they are the companies that are developing the fabrications to build those chips. Nvidia is essentially a software company. Nvidia can keep those margins high and they don't have to build those fabrications. But obviously because it's such a fast growing company, they still have to build out the offices and stuff like this. So there's going to be some slight increase in capital expenditures. It looks like a lot, but whenever I show you the other companies, and I will, this is a drop in the bucket compared to what Amazon, Google, and Meta is spending. Now, one of the things that I did see people bring up as a red flag, and this seems to happen every single quarter, is the fact that Nvidia's inventories are starting to skyrocket, and people are signing that this is a big red flag. But whenever we actually look at the percentage of inventory versus their revenue, it's not increasing. So the fact that it's growing essentially in line with the rest of their revenue is perfectly healthy and just signals that they have additional architectures that they're going to be selling to customers. What I mean is the reason why it started to accelerate back here was because they were starting to build out Blackwell chips which is now their primary selling product. Now over here inventories are starting to build up because they want to start selling their Vera Rubin chips. The next level up from the Blackwell that will also start to sell very well. But the reason why I'm talking about Nvidia is not just based on this growth. A lot of companies grow very fast, but also they're very expensive businesses. The most interesting part about Nvidia is its valuation. It's the speed at which it's growing coupled with how cheap I believe this company to be. Now, if you end up taking a look at their market cap or total enterprise value over the last couple of years, this has gone up a lot. So, it's hard to say whenever they're at their highest market cap that they are very, very cheap right now. But it's that growth that's tying in with that amount of market cap that's the most significant part keeping this company cheap. So how do we measure that? Well, we look at ratios. Here is Nvidia's price to earnings and forward price earnings, meaning just the regular price earnings is the last 12 months and then the forward is the next 12 months. How much this company is trading at a multiple of their earnings. So on a trailing base, they're trading at 33 times. Well, on a forward base, they're selling at 21 times. This is, as you can see from this chart, some of the cheapest valuations that you've ever been able to purchase this company. Or on a free cash flow basis, you can see that Nvidia's trading at a 43 times trailing or 22.7 times forward price to free cash flow metric. So, pick your metric. I'm not trying to be nitpicky about their overall amount of tax that they're paying or their capital expenditures and seeing their actual cash that they're bringing into the business. Both are doing extremely well. It's not one metric here. Their growth is accelerating to some of the highest growth rates that we'll ever see from a large public company like this. Next quarter, they're expected to grow by 100% coupled with the highest margins we've ever seen. A 71% net income margin. But then on top of that, they are also trading at some of the lowest valuations we've seen this company trade at over the last couple of years, even though the market cap has continued to climb. So, their actual company is growing faster than their market cap, which makes the company even cheaper, which is my margin of safety. It's why I can continue to invest and not want to sell any shares is because this company is getting cheaper over time, which makes it a safer investment. Another way to value a company's growth in their metrics is to base it on the valuation of their peers. Whenever we look at the Meg 7, and this is only looking at the top six, okay, Tesla is by far the most expensive company, and it makes this chart look completely different because it's way, way above all the names that are here. It wouldn't even be on this screen here. If we end up taking a look, Apple has now exceeded the price to earnings ratio of Nvidia, trading at essentially 37 times multiple, whereas Nvidia has actually continued to fall now down to 33 times. This puts it in line with Amazon or Google that are trading in that sort of rough 30 percentages marks and then the cheapest names based on a P ratio is Microsoft and Meta. Obviously, you need to take growth rate into account. You need to take margins. You need to take the durability of that growth. How sticky is the business. But Nvidia continues to sell and showing that this run rate for how long this buildout is, this artificial intelligence data center buildout is not slowing down. In fact, it's reacelerating. That's why whenever we look at the forward PE ratios of all these companies, Nvidia falls from being, you know, the second highest on the list all the way down to the second lowest just below Meta while also growing like Meta wants to grow at a 30% rate and Nvidia is here cracking or about to crack triple digits. Yet this whole time Nvidia remains extremely disciplined, not being highly dilutive. the share counts are falling over time and they also said that we plan to review our dividend on a regular basis as we continue to scale our business. We are also announcing an $80 billion share repurchase authorization which is in addition to the $ 39 billion remaining on our current plan. So it's in addition. So now they have essentially $119 billion that they're going to be buying back and they also increased their dividend by 25 times quarter over quarter. But let me take another minute on guidance really quick because the first slide that I ended up showing was not enough. Colette, the CFO of Nvidia, reiterated that they are still seeing full confidence in 1 trillion in sales for Blackwell and Reuben revenue that they foresee between 2025 through calendar 2027. This was higher than what Wall Street initially anticipated and is also inclusive of only Blackwell and Reuben. This is not Vera Standalone. This is not the Grock chips. This is not Vera Rubin Ultra or Fineman or any of these other chips. It's purely just the Blackwell architecture and the Vera Rubin architecture. Whenever it comes to that Vera CPU standalone that I was just talking about, Vera CPU opens up a brand new $200 billion TAM for Nvidia, a market we have never addressed before. Every major hyperscaler and system maker is partnering with us to get this deployed. We have visibility to nearly $20 billion in total CPU revenue this year, setting us up to become the world's leading CPU supplier. So all of that exciting CPU TAM growth that AMD and ARM and all these other companies have been talking about, including Intel, Nvidia is essentially stepping in year one and saying, "Hey guys, we're about to be the biggest name in this business and we are just getting started." By the way, while the $1 trillion mark between 2025 and 2027 is very exciting, I think this is even more exciting. With analysts now forecasting hypers scale capex to exceed $1 trillion in 2027 and Agentic AI beginning to proliferate all industries, AI infrastructure spending is on track to reach 3 to4 trillion annually by the end of this decade, meaning 2030. We're years away and we're on track to do this. If you take a look at some of these companies, I've got Coreweave on here Oracle Meta Amazon Google and Microsoft. All of the companies that have reached Gigawatt scale, just these six companies alone, and really five honestly, is reaching roughly $500 billion in total spend. And that growth rate has been extremely aggressive. So, I just want to reiterate this page one more time because I think it's so important. Nvidia's net revenue is about to exceed 100% growth year-over-year based on the models and the products that we have today. And that reacelerated because of Agentic AI and no one thought that it would happen this good this quickly. We don't even have Claude Mythos yet or the other models that potentially are being leaked like Project Iris with chat GPT that are out yet or potentially other products that could be generative AI or physical AI that could accelerate this growth even faster. And this wouldn't be that the entire market shifts to those areas. They would all happen on top of each other and we need even more chips to facilitate that growth. There's no cap to how big a company can be. The first trillion dollar company was Apple. Two years later, they broke the $2 trillion mark. And then one year later, they broke the $3 trillion mark. I think Nvidia is on a similar path to break most milestones. They hit four and five in the same year. And they could potentially get to 6, 7, 8, and beyond if this growth rate continues to keep up. Let's imagine that the market is scared that Nvidia could potentially be 10, 15% of the overall S&P 500 index. So they fear buying into a company that might already be at its overall like high high market cap price. This is where the accelerated buybacks and dividends become the real winner because if the market doesn't want to buy your stock, Nvidia will buy its stock. And if that profitability continues to skyrocket, you think $80 billion today is a lot. Wait till they grow earnings by 100% year-over-year, they'll start to do $160 billion or $320 billion worth of buybacks or $640 billion worth of buybacks if they can continue to stack on that growth. And so, while that's not believable right now, it all depends on the model providers and if they can make the workplace more productive, meaning also more profitable. If it is more profitable, companies will continue to spend more and more on these products. But ladies and gentlemen, if you guys like these sort of reviews, all I ask is that you subscribe, check out some of my other content. Until next time, thank you all so much for watching. really do appreciate your time and bye for