Nvidia just hit an all-time high. Why some think a rally is just getting started
Nvidia shares popped to an all-time high on Monday – its first since last October – but the chip giant’s performance has been lagging that of its peers this year. Still, some think the stock is poised to catch up in a big way with one analyst noting Nvidia could soon pivot to a change in focus to shareholder return through buybacks and dividends. The Philadelphia Semiconductor index is up more than 36% in April and is trading nearly 50% over its 200-day moving average. That’s a “distance not seen since the peak of the dotcom bubble,” Goldman Sachs traders observed over the weekend. Nvidia has rallied over the same period, but over 20% – well shy of the index overall. That’s noteworthy because the company is the largest single component of the index at 10.82%. Year to date, the gap between the semiconductor giant and its peers is even larger, with Nvidia up 15% versus the Philadelphia Semiconductor index’s roughly 46% advance. “We looked at the performance of all the semiconductor and semiconductor capital equipment stocks, and guess which stock is the 49th best performer over the last 3 months – even if it has done great off the bottom this month – NVDA!” analysts with Trivariate Research wrote in a weekend note to investors. NVDA SOXX 3M line Nvidia versus SOX over the past three months. Focusing on greater returns to investors Analysts see a number of reasons that Nvidia’s performance could rise relative to its competitors in coming quarters. Nvidia’s dominance in graphics processing units (GPUs) makes it well positioned to increase returns to shareholders and to moderate on investment and capital expenditures, thereby boosting its stock. “With the bulk of ecosystem investments likely complete, NVDA could pivot towards shareholder returns that could broaden stock ownership across dividend/income-oriented funds; alleviate concerns around unexpected large M & A and noisy vendor financing; and support a justified re-rating from its currently discounted,” Bank of America analyst Vivek Arya and colleagues speculated in a Monday note. Trivariate’s Adam Parker ventured a similar guess, seeing an opportunity for investors to generate more profit as Nvidia’s market cap rises toward $10 trillion by 2030 from its current level of more than $5 trillion. “If investors feel compelled to take profits, we think it makes sense to buy NVDA,” they wrote. “Our belief is that this will likely be a $10 Trillion market cap company by the end of the decade, owing to the fact that it is a sector, not a stock.” Nvidia currently pays out just a minimal quarterly dividend: 1 cent per share, with a current yield of just 0.02%. Comparable companies to Nvidia provide an average 0.89% dividend yield, Bank of America found. The firm noted that the chip company’s free cash flow returns have also lagged those of its peers. “We believe at a minimum NVDA could consider boosting its dividends yield from a paltry 0.02% currently, towards 0.5%-1%, in line with Apple’s 0.4% and Microsoft’s 0.8% dividend yield,” Bank of America’s Arya wrote in his Monday analysis. Providing a higher yield would only require between $26 billion and $51 billion, or between 15% and 30% of their 2026 free cash flow, leaving “enough ammunition for other uses such as buybacks and ecosystem investments,” he said. Nvidia is also poised to gain from increasingly proven demand for overall AI compute. “We expect AI-related demand to drive a multi-year runway of growth for NVDA’s datacenter GPU business,” JPMorgan analyst Harlan Sur and colleagues wrote in a Monday note. The first-quarter semiconductor surge has been driven so far by more traditional central processing units (CPUs), demand for which is holding strong through the AI boom. Intel ‘s first-quarter adjusted earnings surprised hugely to the upside last week, sending shares up nearly 24% the day after results were published. Shares of fellow CPU maker Advanced Micro Devices also benefited from the news. More expansions in the near term In the near term, Wall Street thinks the company will continue vertical investments and expansions, both upstream and downstream from its core GPU business. “Our hardware team rolled out its initial CY27 capex outlook of +40% growth,” JPMorgan analysts said on Monday. “NVDA and AVGO have both discussed extended visibility (backlog) into CY27 as customers proactively lock in capacity well in advance of deployment, amid expectations of significant growth in compute demand.” “Specifically, Nvidia has discussed $1T+ of Blackwell and Vera Rubin orders/demand visibility through CY27,” they added.
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