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Nvidia (NVDA) deserves to be a top long-term portfolio holding in part because of its lucrative profit margins, one veteran investor says.
"I don't have any company with operating margins as fat as Nvidia — they're ridiculous," Navellier & Associates founder and chairman Louis Navellier said on chof360 Finance's Opening Bid podcast (see video above or listen below).
Navellier is correct in that assessment.
Given its wide lead in semiconductor innovation, Nvidia has been able to command premium prices for years. The trend has only accelerated in the current cycle led by powerful AI chips such as Hopper and, soon, Blackwell.
chof360 Finance analysis shows Nvidia's operating profit margins have gone from 39.9% for the fiscal year ended Jan. 31, 2021, to 58.1% for the fiscal year ended Jan. 28, 2024. When Nvidia reports earnings on Feb. 26, analysts estimate it could report an operating margin of 67.5% for last year. For 2025, the Street thinks Nvidia's operating margins will be around a similar level.
Read more: How does Nvidia make money?
"Margin expansion creates a lot of earnings surprises," Navellier says on why it's hard to sell out of Nvidia. "You want positive revisions. The analysts are notorious [for] underestimating. And so while the stock is being institutionalized, just want to ride it as long as you can."
Navellier said he has been holding Nvidia for clients since May 2019.
Listen: What Bill Gates thinks about Nvidia
The Street is sticking with Nvidia going into its market-moving earnings report on Wednesday after the close of trading.
Despite China-based DeepSeek rocking the super-bullish AI thesis earlier this year, Wall Street still sees Nvidia profiting from the global buildout of AI infrastructure. Aggressive 2025 capital expenditure assumptions by hyperscalers such as Amazon (AMZN) and Meta (META) shared during this earnings season underscore the point.
However, that's not to say there aren't signs of caution going into Nvidia's earnings report.
chof360 Finance data reveals Nvidia's first quarter earnings per share (EPS) trend has drifted modestly lower over the past 30 days. The Street has also not pushed up its 2025 EPS estimates on Nvidia for more than 60 days.
Nvidia is also among the most cheaply valued AI stocks as some take a wait-and-see approach to the quarter and guidance.
On a forward price-to-earnings (PE) multiple basis, chof360 Finance data shows Nvidia trading at 29 times forward earnings. Broadcom (AVGO) and Marvell Technology (MRVL) are valued at 35 times and 41 times, respectively. Arm Holdings (ARM) clocks in at 72 times.
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"If you compare its earnings multiple to some of the other AI companies, let alone other 'Magnificent Seven' and, of course, other S&P names, it's at an incredible premium," The Bahnsen Group CIO David Bahnsen said on chof360 Finance's Catalysts. "Now, I agree it's earned it, I agree it's deserved it, and generated the order flow."
Bahnsen is among the few bears on the Street on Nvidia.
"But one of the key things that was said ... it's just simply untrue that it's a monopoly," Bahnsen added. "Nobody in their right mind thinks Nvidia is a monopoly. There's tons of competition, but all the earnings multiple estimates are based on them never having competition."
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Three times each week, I field insight-filled conversations and chats with the biggest names in business and markets on Opening Bid. You can find more episodes on our video hub or watch on your preferred streaming service.
Brian Sozzi is chof360 Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email [email protected].
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