The main concerns around NVIDIA Corp. (NASDAQ:NVDA) are the weight of expectations from this multi-trillion-dollar entity, and fears of a slowdown in AI infrastructure capital spending. Based on prevailing metrics, the business fundamentals provide reasonable support to the stock’s bullish run.
With its triple-digit topline growth, the company offers solid margins, robust cash flow generation, and moderate valuation multiples. With a $5.45 trillion market capitalization, even strong results could hurt the sentiment if they fall short of what the market has priced in. NVIDIA currently ranks #2 in our recent list of 10 Best AI Stocks to Buy in October. See which stock made it to the top and why.
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How CUDA Anchors the AI Buildout
NVIDIA was trading at $239.24 by October 6 closing, pushing its 2026 run to 28.28%. The stock has outpaced the broader S&P 500 index by a twofold margin over the last 52 weeks. It is up 33% over the last six months, compared to 33.88% for Insider Monkey Billionaire Index and 18.18% for S&P 500 ETF (SPY).
Even at this scale, the market is still rewarding the company’s performance as it has delivered $302.9 billion in revenue on a trailing twelve-month basis. Notably, the company posted a 105.9% topline growth during the second quarter of fiscal 2027.
The biggest advantage for NVIDIA stems from its capabilities extending beyond the chips, as its existing data center platforms are built as integrated systems. Apart from selling a broad array of networking solutions, software systems, and GPUs, its CUDA ecosystem is now strongly embedded within the global AI buildout, as a foundational software layer. It would also be interesting to see how the ongoing AI buildout positions this other memory and storage mega-cap stock to reward investors?
Profitability Metrics Stand Out Among Mega-Caps
Profitability metrics stand out for NVIDIA, as the company has yielded a 66.24% operating margin during the last 12 months. Net margin for the period stood at 63.66%. These figures are typically associated with software names rather than a hardware maker. And that is what makes NVIDIA an interesting pick for investors, as the company’s 117.2% return on equity is eye-catching.
The company recently released its Open Agent Safety Platform, aimed to prevent security threats emerging from AI agents. The platform comprises various tools that carry a lot of commercial significance. The platform combines OpenShell secure runtime software, the Sentry monitoring system, and Vera CPUs to help enterprises monitor AI agents and enforce security policies. Investors can clearly see how the need for safer agents would lead to a meaningful demand for NVIDIA’s computing capacity.
Institutional Sentiment
Institutional interest across 1,000+ hedge funds tracked by Insider Monkey shows an increase in institutional exposure to the stock. According to 13F filing data, total number of hedge funds that held positions jumped to 285 by the end of second quarter in 2026, relative to 275 in the previous quarter.
With 1.94 billion shares, BlackRock is the largest institutional investor owning 8.06% of the outstanding shares. Other notable institutional names include Vanguard Capital Management and FMR, which held 6.39% and 4.26% of outstanding shares, respectively.
Valuation Still Does Not Appear Stretched
Valuation metrics indicate that the stock’s rally has been supported by underlying earnings rather than mere speculation. NVIDIA currently trades at a trailing P/E multiple of 28.51x and 24.88x on a forward basis. These multiples could be justified by NVIDIA’s exceptional earnings growth, although the valuation remains sensitive to any slowdown in AI infrastructure spending. Short interest in the stock remains minimal. A short float of 1.27% and a short ratio of 2.29 mean few investors are betting against the stock. Overall, NVIDIA’s exceptional revenue growth and profitability appear to justify its relatively moderate earnings multiples, although sustaining this valuation will depend on continued AI infrastructure spending and earnings growth.
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