The latest CES showcased rapid advancements in AI and computing, with NVIDIA (NVDA) unveiling the GeForce RTX 50 series and Blackwell AI accelerators, emphasizing its leadership in AI technology. 

NVIDIA’s partnerships, such as with Cerence and Microsoft, reinforce its dominance in the AI space by supporting infrastructure growth and AI-powered applications. 

The market expects NVIDIA’s earnings to rise significantly, reflecting its strong growth potential. 

While its high valuation raises concerns, continued innovation, expanding partnerships, and increasing demand for AI tools support a bullish outlook.

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The latest Consumer Electronics Show (CES) once again demonstrated how rapidly the tech industry is pushing the boundaries of AI and advanced computing.

Companies introduced new processors and AI tools designed to change how businesses and consumers use technology.

The event also saw major partnerships focused on improving AI models and infrastructure, showing how collaboration is helping drive progress.

As more industries adopt AI, the need for stronger computing power and better technology keeps growing, keeping companies leading in AI development in the spotlight.

NVIDIA’s (NVDA) CEO Jensen Huang introduced the GeForce RTX 50 series and Blackwell AI accelerators, explaining how machine learning is changing software development.

The new GPUs’ lower price points and advanced capabilities show that the company hasn’t forgotten about the consumers.

NVIDIA is also expanding its presence through key partnerships.

These developments explain why NVIDIA’s valuation remains high and our EEA model clearly shows this.

The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.

In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.

At the current stock price, the market predicts that the company’s Uniform return on assets ‘‘ROA’’ will rise to around 250% from an already high 75% last year.

While a high valuation often raises concerns, it doesn’t necessarily mean a stock will decline soon.

Just as a cheap stock isn’t guaranteed to rise, an expensive one doesn’t have to fall immediately.

What matters is the market’s reaction to key developments, and NVIDIA continues to benefit from positive catalysts.

The stock remains near its all-time high, largely due to ongoing strength in AI investments and partnerships.

A recent example of this was NVIDIA’s expanded collaboration with Cerence.

Cerence (CRNC), a company focused on AI-powered virtual assistants in the automotive sector, announced it will advance its large language model, the Cerence Automotive Large Language Model (CaLLM), using NVIDIA’s AI Enterprise platform.

Another positive development for NVIDIA is Microsoft’s continued investments in AI infrastructure.

Microsoft has been expanding its data centers to support AI-driven workloads, a move that directly benefits NVIDIA, given its dominance in supplying GPUs and related technologies critical for these operations.

As AI becomes a larger part of business operations, the demand for high-performance computing and data infrastructure is expected to rise, further driving demand for the company’s products.

NVIDIA’s leadership in the AI space is not limited to partnerships alone. 

The company continues to set the pace for innovation, particularly in the development of tools and platforms that simplify the deployment of complex AI models.

This broad influence allows NVIDIA to play a foundational role in both the technology and commercial applications of AI.

Its products are becoming essential across multiple sectors, from data centers and autonomous vehicles to content creation and industrial automation.

The combination of continued AI adoption, growing infrastructure investments, and strategic partnerships has kept NVIDIA’s valuation high.

While some investors may be wary of its premium pricing, the company’s ability to consistently deliver growth opportunities makes a strong case for maintaining a bullish outlook.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research