Recent reports have emerged that Elon Musk is looking to raise $20 billion for xAI, his newly merged artificial intelligence and social media venture.

Experts have suggested that most of this fundraising will be spent on purchasing hardware to bolster the company’s AI capabilities. This would inevitably benefit the poster child of AI hardware, Nvidia (NVDA). 

With this catalyst brewing, how should investors approach Nvidia stock here? 

Nvidia Boasts Robust Fundamentals

With a market capitalization of $2.7 trillion, Nvidia is one of the most valuable companies in the world. The company has delivered exceptional financial performance in its recent years, with its revenue and net income growing at compound annual growth rates (CAGRs) of 39.48% and 60.79%, respectively, underscoring its dominance in the semiconductor and AI industries.

In its most recent quarterly update, Nvidia once again exceeded Wall Street’s expectations, continuing a consistent pattern of outperformance. The company posted a record revenue figure of $39.3 billion for the quarter, reflecting a sharp 78% increase compared to the same period in the prior year. The data center segment proved to be the main catalyst behind this performance, delivering $35.6 billion in revenue — a year-over-year jump of 93% — and cementing its position as the company’s principal growth driver.

Earnings per share came in at $0.89, up 71% from the corresponding quarter a year ago. This marked the ninth straight quarter in which Nvidia outpaced consensus earnings estimates, further reinforcing its strong operational execution. However, one area of softness emerged in its gross margins, which slipped to 73.5% from 76.7% the year before, hinting at rising competition and potential cost pressures impacting overall profitability.

From a cash generation standpoint, the quarter was equally impressive. Nvidia’s operating cash flow surged to $16.6 billion, significantly higher than the $11.5 billion it generated during the same period last year. The company wrapped up the quarter with a substantial cash reserve of $43.2 billion and carried no short-term debt, positioning it well for strategic investments and future growth opportunities.

Favorable Strategic Tailwinds

My recent analysis on Nvidia focused on the company's competitive edge due to its control over the entire computing stack and its software prowess through its CUDA platform.

Nvidia has recently unveiled that its leading AI accelerators from the Blackwell series are now being produced at Taiwan Semi's (TSM) U.S.-based facilities, a move that significantly reduces its exposure to geopolitical and tariff-related uncertainties. This shift in manufacturing is expected to be a considerable advantage for Nvidia, providing more stability in its supply chain and operations.

Moreover, the company is set to significantly ramp up the distribution of Blackwell chips, with the GB200, Nvidia’s most advanced GPU designed for handling the most intensive AI tasks, being a primary focus. Nvidia aims to ship millions of these high-performance GPUs this year, with an estimated shipment of around 2 million units in 2025, provided that mass production begins as scheduled in the second quarter of 2025.

Additionally, the rapid growth of AI reasoning models continues to support the demand for accelerated computing solutions. As more organizations look to scale Nvidia’s infrastructure for training next-generation AI models, the company’s position in the market remains favorable, driving sustained demand for its cutting-edge hardware.

Analyst Opinions on NVDA Stock  

Analysts have deemed Nvidia stock a “Strong Buy” with a mean target price of $167.75, which denotes upside potential of about 54% from current levels. Out of 43 analysts covering the stock, 37 have a “Strong Buy” rating, two have a “Moderate Buy” rating, and four have a “Hold” rating.