Nvidia Is Buying Hugging Face for Nearly $13 Billion. How the Deal Could Help Drive NVDA Stock Higher.

After its shares finally broke the curse of decline following quarterly results, reports have emerged that Nvidia (NVDA) is poised to complete the acquisition of open-source AI platform Hugging Face for $12.9 billion. Hugging Face operates a large platform where AI developers can access and share AI models, datasets, software libraries, AI applications, and demos, along with inference and deployment infrastructure.

Hugging Face's proposed buyout would be in line with a key theme of Nvidia CEO Jensen Huang's push for open-source models. But how could Hugging Face actually engender Nvidia's open-source goals? Let's find out.

Leather Jacket Hugs Hugging Face

Jensen Huang has been a vociferous advocate of open-source models and has been equally vocal about U.S. tech companies developing them quickly as an affront against cheaper ones developed by Chinese companies. Huang wants the AI world to be built on the American stack and reckons that if China goes too far ahead with their open-source models, the U.S. will be left behind, and the world's AI build-out will be controlled by the Chinese, bringing a geopolitical risk angle.

With this broader goal in mind, the impending acquisition of Hugging Face fits right within Huang's strategic outlook.

Notably, with Hugging Face, Nvidia would be paying for distribution, developer relationships, and control over an important route through which AI models reach production. Its 2026 platform statistics included about 13 million users, more than 2 million public models, over 500,000 public data sets, and about 500,000 organizations. Thus, instead of betting on a few large model developers, Nvidia would gain access to millions of smaller workloads across language, vision, audio, agents, science, and robotics.

Potentially, Nvidia could then optimize popular models for CUDA, TensorRT, NIM, and its latest GPU systems as soon as developers publish them. That would improve performance and reduce deployment friction, making Nvidia hardware the default choice before a customer even begins comparing accelerators.

Hugging Face also brings a software tool chain that Nvidia has not recreated at a comparable community scale. The Hub stores model weights, data sets, demonstrations, documentation, evaluations, and application code. Transformers gives developers a common interface across competing model families. Diffusers serve image and video generation, while Datasets handle data preparation and distribution. Spaces lets developers demonstrate applications in a browser, and Inference Providers route workloads to outside computing services through one account and programming interface.

Thus, while Nvidia already supplies chips, networking, systems, libraries, and hosted computing, Hugging Face would add discovery, collaboration, testing, distribution, and deployment. Together, they could shorten the route from an experimental model to a paid GPU workload.

Nvidia's Q2 Broke the Cycle

However, the Hugging Face purchase, if it happens, will happen later. For the here and now, Nvidia deserves a pat on the back for its Q2 2027 results. Apart from the usual beats and triple-digit growth (which supposedly is not enough to satiate the market), this time the company provided its first-ever revenue growth outlook for the year following the current fiscal.

Nvidia expects revenue to grow 70% in fiscal 2028, and the management revealed that it could have been more, but supply chain issues (read memory shortage) put a cap on the same.

Back to Q2 2026, Nvidia reported quarterly revenues of $96.2 billion, marking a growth of 106% from the previous year and a Street estimate beat of more than $4 billion. Within this, data center revenues went up by an even sharper 117% in the same period to $89 billion, exceeding expectations of $86.3 billion. It must be acknowledged that no amount of this revenue is being accounted for from China by the company. Overall, Nvidia guided for total revenues in Q3 2027 to range from $105.8 billion to $110.2 billion, when estimates are at about $109 billion.     

Gross margins improved to 75% from 72.4% in the year-ago period. The gross margins guide of 73.5% to 74.5% for Q3 2027 was picked on by some nitpickers to poke holes in the Nvidia investment thesis, yet it did not stop the shares from rising following the results, snapping a streak of four consecutive quarters in which the stock declined the day after earnings.

Meanwhile, earnings rose by 120% from the prior year to $2.22 per share, ahead of the consensus estimate of $2.09 per share. This was the ninth consecutive quarter of earnings beats from the company.

Moreover, a key development that was discussed in the earnings call was that AWS, the cloud market leader, would deploy 2 million GPUs in this quarter up to Q2 2029, which addresses the larger fears of hyperscalers developing their own chips or ASICs and reducing reliance on Nvidia's GPUs.

Net cash from operating activities rose to $24.1 billion from $15.4 billion in the year-ago period. This comprised gains from equity investments of $7.8 billion in companies like OpenAI, SpaceX (SPCX), CoreWeave (CRWV), and Nebius (NBIS), among others. However, a substantial increase of $22.3 billion in accounts receivable in the quarter stood out like a sore thumb, as it lends credence to the circular financing belief. Overall, Nvidia closed the quarter with a cash balance of $22.4 billion, which was much higher than its short-term debt of a billion dollars.

And amid all this, Nvidia still remains reasonably valued. Its forward P/E of 23.16 is just above the sector median of 22.90. Similarly, the forward P/CF of 24.03 times is not far from the sector median of 19.91 times. However, the forward P/S of 12.79 has a notable gap from the sector median of 3.41, yet that does not deter the investment scenario at all.

Nvidia remains the most valuable company in the world, with a market cap of $5.1 trillion, with the stock up 20.7% on a year-to-date (YTD) basis.

Analyst Opinion on NVDA Stock

Thus, analysts remain bullish on NVDA stock, earmarking it a consensus rating of “Strong Buy.” The mean target price of $321.59 indicates a potential upside of 43% from current levels. Out of 48 analysts covering NVDA, 43 have a “Strong Buy” rating, three have a “Moderate Buy” rating, one has a “Hold” rating, and one has a “Strong Sell” rating.