Good News for NVDA Stock: Wall Street Says SpaceX Is Proving That Compute Demand Is Still High

Nvidia Corporation (NVDA) may not be enjoying the same blistering rally that made it Wall Street's biggest artificial intelligence (AI) winner, but the latest developments suggest its growth story is far from over. Fresh reports that SpaceX (SPCX) is planning to expand its AI infrastructure with new data centers in Texas have given Wall Street another reason to stay bullish on the AI chip giant, signaling that the race to build next-generation AI infrastructure is still in its early innings. Wedbush Securities believes the development is another positive catalyst for Nvidia. 

Analyst Matt Bryson said industry checks indicate that SpaceX is seeking significant volumes of AI infrastructure components for data center projects planned for 2027 and beyond. While Elon Musk dismissed reports of a $52 billion server order as "fake news," Wedbush noted that xAI has historically secured more capacity than it immediately required to avoid supply bottlenecks. With the Colossus AI supercomputer already operating in Memphis and additional facilities planned across Texas and Mississippi, AI infrastructure spending shows little sign of slowing. 

For Nvidia, whose GPUs remain the backbone of large-scale AI clusters, that is a strong indication that demand for its cutting-edge chips could remain robust well into the future. So, with Wall Street viewing SpaceX's expansion plans as fresh evidence that the AI investment cycle is far from over, here's a closer look at Nvidia.

About Nvidia Stock

Over the past five years, few companies have become as closely associated with the AI revolution as Nvidia. As AI evolved from a promising technology into one of the world's biggest investment themes, demand for the high-performance computing needed to power it skyrocketed. Nvidia emerged as one of the biggest winners, with its GPUs now driving everything from ChatGPT and cloud AI platforms to autonomous vehicles, robotics, and cutting-edge scientific research. As a result, the company has been at the center of the unprecedented wave of global AI infrastructure spending.

Yet Nvidia's dominance did not happen overnight. Founded in 1993, the company initially built its reputation as a designer of graphics processors for gaming. Over time, however, it expanded the capabilities of its GPUs far beyond gaming, laying the groundwork for what would eventually become the AI era. When generative AI took off, Nvidia was uniquely positioned to benefit, as training and deploying large language models demanded the immense parallel computing power its chips were designed to deliver.

The company's relentless pace of innovation has further strengthened its competitive edge. Nvidia's Hopper-based H100 became the industry's go-to AI accelerator during the first wave of generative AI adoption, while the newer Blackwell platform has pushed performance even further. Looking ahead, the upcoming Rubin architecture is expected to power the next generation of AI workloads. Together, these successive product launches have helped Nvidia establish a commanding lead in the rapidly growing AI computing market.

That leadership has translated into extraordinary financial success. Nvidia is now the world's most valuable publicly traded company, boasting a market capitalization of $1.5 trillion. Its stock has surged an astonishing 14,390% over the past decade, making it one of the greatest wealth creators in market history. Even so, Wall Street's attention is no longer focused solely on Nvidia.

Although NVDA shares have returned a respectable 13.4% over the past 12 months and gained 5.5% year-to-date (YTD), several memory chipmakers and emerging AI-focused companies have delivered even stronger gains, attracting increasing investor interest. At the same time, the market has begun questioning whether the current pace of AI infrastructure spending can be sustained over the long term. Those concerns have started to weigh on Nvidia's stock. After reaching a record high of $236.54 on May 14, the shares have retreated roughly 17%.

Part of that pullback likely reflects investors taking profits after the stock's remarkable rally. However, broader challenges are also beginning to shape the narrative. Several of the world's largest technology companies are accelerating the development of their own custom AI chips in an effort to reduce dependence on Nvidia. Meanwhile, investors continue to debate whether today's massive AI infrastructure investments will ultimately generate returns that justify the enormous capital being deployed.

Nvidia’s Q1 Earnings Snapshot

Concerns that the AI infrastructure boom could eventually lose momentum have become a key part of the conversation surrounding Nvidia. However, the company's latest quarterly results paint a very different picture. Rather than slowing, demand for AI computing power remains exceptionally strong, fueled by continued investment from cloud providers, enterprises, and governments racing to build the infrastructure needed to support increasingly advanced AI models. That relentless demand helped Nvidia deliver yet another record-breaking quarter.

For the first quarter of fiscal 2027, Nvidia reported revenue of $81.62 billion, an impressive 85% year-over-year (YOY) increase that comfortably exceeded Wall Street's expectation of $78.84 billion. Profit growth was even more remarkable. Adjusted earnings per share soared 140% from the same period last year to $1.87, beating analysts' consensus estimate of $1.77. Also, the quarter highlighted the dramatic evolution of Nvidia's business. 

Reflecting its transformation from a graphics chip maker into an AI infrastructure leader, the company has reorganized its operations into two primary reporting segments: Data Center and Edge Computing. Unsurprisingly, the Data Center business continues to dominate Nvidia's growth story. The segment generated $75.2 billion in quarterly revenue, representing more than 92% of the company's total sales, while expanding an impressive 92% YOY. 

The performance underscores the continued appetite for Nvidia's AI accelerators as customers aggressively expand data center capacity to power generative AI applications and other compute-intensive workloads. Although much smaller in scale, Nvidia's Edge Computing business is also gaining momentum. Revenue climbed 29% YOY to $6.4 billion, driven by growing AI adoption across gaming and PCs, industrial robotics, networking, autonomous systems, and automotive applications.

Beyond its exceptional revenue growth, Nvidia continues to demonstrate remarkable pricing power and operational efficiency. The company reported a GAAP gross margin of 74.9%, unchanged from the previous quarter and significantly higher than the prior year quarter’s 60.5%. Maintaining margins at these levels despite intensifying competition suggests demand for Nvidia's products remains exceptionally strong.

In addition, the company is rewarding shareholders while continuing to invest aggressively in its future. During the quarter, Nvidia returned approximately $20 billion through share repurchases and cash dividends, even as it continued funding the technologies and products expected to drive its next phase of growth. Perhaps most encouraging for investors was management's outlook. Nvidia expects second-quarter fiscal 2027 revenue of approximately $91 billion, well above Wall Street's consensus estimate of $86.11 billion, while forecasting gross margins to remain close to 75%.

Even more striking is what that guidance excludes. The company's outlook assumes zero Data Center compute revenue from China, suggesting demand from the rest of the world remains strong enough to support another quarter of record growth despite ongoing geopolitical restrictions. 

For investors worried that the AI infrastructure spending cycle may be approaching its peak, Nvidia's latest earnings offer little evidence to support that view. With revenue accelerating at an extraordinary pace, margins holding near record levels, and management projecting another blockbuster quarter, the AI investment boom that has fueled Nvidia's remarkable rise still appears to have plenty of room left to run.

What Do Analysts Think About Nvidia Stock?

Despite recent volatility and growing debate over the sustainability of the AI boom, Wall Street's confidence in Nvidia remains overwhelmingly strong. The stock continues to carry a consensus "Strong Buy" rating, with 43 of the 47 analysts covering NVDA recommending a "Strong Buy." Three analysts maintain a "Moderate Buy" rating, while just one has a "Strong Sell" recommendation. The average price target of $304.32 implies upside potential of 54.9% from current levels, while the most bullish target on the Street of $500 points to a remarkable 154.6% potential gain.