Nvidia Is Doubling Down on the Energy Industry with SLB. Does That Strengthen the NVDA Bull Case Now?

Chip major Nvidia (NVDA) is set to collaborate with energy services company Schlumberger (SLB) to build AI infrastructure and models for the industry. The deal will lead the two companies to work under an "AI Factory for Energy" framework wherein SLB will act as the modular design partner for Nvidia's DSX data centers. To be powered by generative AI models and industry-ready agentic AI, the framework will run on SLB's digital platforms. Consequently, other energy companies can use these platforms and leverage AI for their business operations.

And by manufacturing data center components off-site, they aim to cut down on costs, labor constraints, and lead times. This makes it much easier and cheaper for energy operators to scale up computing capacity on demand.

This adds to the longstanding partnership between the two companies, which began almost two decades ago in 2008. Then, Nvidia assisted in developing SLB's subsurface visualization and seismic imaging software. Fast forward to 2024, and the companies had again joined hands to develop generative AI models for the energy sector.

Valued at a market cap of about $4.1 trillion, Nvidia is the most valuable company in the world, with its stock up 52% over the past year. So, what is the rationale behind aligning itself with energy companies, and is it a prudent bet for its shareholders in the long term? Let's find out.

Energy Is Nvidia's Silent Power

Jensen Huang has never been hesitant about how demand for AI will explode, and it will continue to grow in the years to come. Yet, Huang reckons that energy can be a stumbling block for the AI buildout. Massive amounts of energy need to be expended for an AI-led world, and within that, both renewable and non-renewable sources of energy will play crucial roles. Nvidia is preparing for that world by not just designing the best chips on the market, but they are also making efforts to ensure that energy does not become a hindrance.

Starting with the 2008 partnership with Schlumberger, this initial collaboration provided energy companies with a massive advantage in upstream exploration by allowing engineers to visualize complex geological environments with unprecedented clarity. The rationale was simple but profound because finding crude reserves requires parsing through monumental datasets, and Nvidia possessed the processing power required to decode that information rapidly.

Over the years, as the industry shifted from basic digitization to advanced analytics, Nvidia expanded its footprint by aligning with other energy heavyweights, including Baker Hughes (BKR), Halliburton (HAL), and the state-owned powerhouse Saudi Aramco. When partnering with Baker Hughes, the mandate centered around optimizing power generation and enhancing predictive maintenance for industrial machinery. Meanwhile, the collaboration with Saudi Aramco was part of a broader $90 billion investment push aimed at establishing localized industrial artificial intelligence infrastructure and specialized training hubs.

Furthermore, the alignment with energy firms has bolstered the environmental, social, and governance credentials of the chipmaker. By proving that its technology can reduce the carbon footprint of data processing by as much as 80%, Nvidia has attracted a tidal wave of institutional investment from sustainability-focused funds. Consequently, shareholders have reaped the rewards of a stock that commands a significant premium driven by durable revenue streams from industrial applications.

Ultimately, the overarching rationale for Nvidia to deeply embed itself within the energy sector is twofold. First, the heavy industries market represents a staggering $100 trillion in global value, making it a highly lucrative frontier for enterprise software and hardware sales. Second, the energy sector is under immense pressure to decarbonize and operate more efficiently, and Nvidia provides the foundational compute power necessary to achieve these lower-carbon outcomes.

Unquestionably Strong Financials

Nvidia once again delivered a very strong quarter for its fiscal Q4 that ended Jan. 25, 2026, comfortably surpassing both revenue and earnings expectations.

Revenue reached $68.1 billion, representing a 73% increase from the same period last year and beating the company’s own prior guidance by more than $3 billion. The data center segment continued its rapid expansion, growing 75% year-over-year (YoY) to $62.3 billion, helped by the initial ramp of the Rubin platform. Gaming revenue also rose solidly, up 47% to $3.7 billion.

Moreover, earnings per share increased 82% to $1.62, exceeding the consensus estimate of $1.53. This marked the company’s ninth consecutive quarter of beating earnings expectations.

Meanwhile, cash generation was equally impressive. Net cash from operating activities more than doubled to $36.2 billion from $16.6 billion in the prior-year quarter. Overall, Nvidia closed the period with $62.6 billion in cash and equivalents, significantly ahead of its short-term debt of under $1 billion.

Conversely, for the first quarter of fiscal 2027, the company guided revenue to approximately $78 billion, which would represent 76.9% YoY growth.

On valuation, Nvidia trades at a premium, but not an extreme one. The forward P/E ratio stands at 21.12, roughly in line with the sector median of 21.50. However, the forward P/S of 11.52 and P/CF of 22.30 remain noticeably higher than the sector medians of 2.96 and 16.50, respectively.

Analyst Opinion on NVDA Stock

Overall, analysts remain bullish about the company, attributing to it a consensus “Strong Buy” rating. The mean target price of $269.48 indicates an upside potential of about 59% from current levels. Out of 49 analysts covering the stock, 44 have a “Strong Buy” rating, three have a “Moderate Buy” rating, one has a “Hold” rating, and one has a “Strong Sell” rating.