NVIDIA (NVDA) gained a new bull on Wall Street as William Blair initiated coverage of the stock with an Outperform rating, citing the company's leadership in parallel computing and its dominant position in the AI industry.
According to the firm, "Nvidia (NASDAQ:NVDA) has a long and storied history of designing parallel computing systems," which has propelled the company into high-growth markets like gaming, automotive, and high-performance computing (HPC).
Analysts noted that Nvidia's data center revenue skyrocketed by 217% in fiscal 2024 and is expected to grow by 132% in fiscal 2025, reaching over $110 billion, up from just $15 billion in fiscal 2023.
William Blair explains that a key factor behind Nvidia's growth is its system-level approach, which has expanded its total addressable market (TAM) from around $100 billion in GPUs to the broader $800 billion semiconductor and $1.6 trillion cloud services markets.
The note highlights Nvidia's deep software ecosystem, specifically CUDA, which has over 5 million active developers, as well as the company's strategic acquisitions, such as Mellanox and Cumulus, which have strengthened its networking and systems engineering capabilities.
"The rapid rise in demand for AI solutions has driven Nvidia's gross margins to 74% in fiscal 2024, well above its 50%-60% historical range," says the firm. "Part of this improvement is related to Nvidia's technical aptitude—we estimate a one- to two-year lead over competitors in AI accelerator performance."
The firm also attributes this margin growth to Nvidia's technical lead in AI performance and its integrated systems, like the DGX product line, which layers in key intellectual property across the entire IT stack.
With shares trading at 30 times P/E and 32 times EV/FCF based on 2025 estimates, William Blair sees further upside, citing Nvidia's strong revenue and earnings growth. However, analysts caution that risks remain, including exposure to China, semiconductor cyclicality, and "key man risk" with CEO Jensen Huang.