NVIDIA’s Quantum Supercomputer Move Could Be Bigger Than AI

NVIDIA’s up over 80% since April… and people still wonder if it’s too late to get in.

The company has just launched a global quantum R&D hub in Japan, housing the largest quantum-focused supercomputer on the planet, powered by over 2,000 H100 chips.

I’m Rick Orford. I’ve been trading since ‘99. I’m not a financial advisor, and that’s a good thing, because I don’t peddle hype. I break down the numbers so you can make better, sharper investing decisions.

Now here’s what most people miss: NVIDIA’s pulling in 56% profit margins, $44 billion in revenue, and now it’s back in China, unlocking billions in potential sales.

But at 43x forward earnings… and China buying less-powerful chips under export rules…

Is Nvidia stock a rocket ship or are we reaching a tipping point?

NVIDIA’s Overview

NVIDIA is the global leader in accelerated computing and AI hardware. It is best known for its Graphics Processing Units, or GPUs, which still continue to dominate the industry to this day. 

But what keeps NVIDIA thriving is its capacity to evolve. The company is not only a GPU giant, but it is also pushing the boundaries of AI’s capability and quantum computing.

NVIDIA just unveiled a global research and development hub in Japan. It is the home to the world’s most extensive supercomputer built specifically for quantum research. With it, the company is expecting to make breakthroughs in medicine, clean energy, and finance.

The hub will use over 2,000 H100 chips from NVIDIA. What’s more exciting is that it’s integrated with quantum technologies from leading innovators like Fujitsu, QuEra, and OptQC

In addition to the H100, NVIDIA’s new generation chips, such as H200 and Blackwell architecture, form the backbone of generative AI models used by some of the largest companies, including OpenAI, Meta, Google, and Amazon.

However, with the stock price up over 82% since its April lows, I wonder whether it will increase further or if some profit-taking is around the corner.  Oh, and if you want to follow along with the charts,

So, first, let’s look at the ratings. Nvidia has a consensus “Strong Buy” from 45 analysts that’s been relatively stable over the last 3 months. There’s a high target price of $250 on the stock, suggesting as much as 40% upside in the stock over the next year. 

Why is NVIDIA in the spotlight?

So, it’s not surprising that everyone’s talking about NVIDIA, and there are lots of good reasons. 

First, the elephant in the room. Investors are buzzing over NVIDIA because the company was the first to reach a $4 trillion valuation, even before Microsoft and Apple, the two companies that were considered the biggest in terms of market cap before NVDA kicked them off the top. 

And now what puts the company in the spotlight is the ease of export restrictions from the U.S. government. 

Earlier in the year, NVIDIA missed out on billions in sales due to the government holding back exports of powerful AI chips, but now that’s been resolved, China can now be a big revenue driver now that NVIDIA can reenter the Chinese market.

Now, I should note that Nvidia’s sales in China would not reflect until its third quarterly financials. With that, let’s see how NVIDIA has performed so far.

Financials

NVIDIA’s most recent financials are impressive, with sales reaching $44.1 billion, up 69.2% from the same quarter last year. The company’s net income also rose 26.2% to $18.8 billion. Its earnings per share also came in at $0.77, which is 17 cents higher year-over-year.

Earnings per share, or EPS, is a measure of a company’s profitability divided by the number of outstanding shares. Basically, it tells you how much profit the company generated for each share of stock. It doesn’t matter how much revenue the company makes.  The more EPS a company makes, the more profitable it is. 

A $0.17 increase may look minimal, but it means that NVIDIA generated significantly more profit per share compared to the same period last year. This signals stronger financial health, which justifies the high stock price.

The company pays a forward annual dividend of $0.04, which translates to a yield of 0.02%, so you’re not buying Nvidia for the dividend.  

With such impressive results, NVIDIA’s first quarter results may be hard to beat. 

So the question is: can the company continue its momentum and deliver even stronger performance in the quarters ahead?

Let’s see how it can happen.

Growth Catalysts

NVIDIA’s product lines continue to dominate the market, and the company looks well-positioned for further growth.

First, NVIDIA is resuming the export of H20 AI Chips to China.

NVIDIA’s CEO, Jensen Huang, confirmed that it won approval from the Trump administration to file a license and start shipping its H20 chips to China. For context, the Chinese market alone brought about $17 billion in sales in the previous fiscal year. The heightened export restriction is estimated to cost NVIDIA roughly $2.5 billion in sales, which would likely be reflected in the company’s next quarterly report. But even if its reported sales do go down, I don’t think it will hurt market sentiment. Instead, I can see a bullish scenario over NVIDIA’s return to China and the revenue it will unlock.

The most advanced AI chips are useless if the Ethernet used cannot handle the workload. So, NVIDIA unveiled its Spectrum X Ethernet platform, which is 1.6 times faster than regular Ethernet and is specifically tailored for large-scale LLM training.

This further establishes NVIDIA as the leader in AI innovation. The company is taking over both the AI GPU industry and the road on which these chips operate, making it more efficient to train AI models. The more value NVIDIA gives to its customers, the more revenue the company earns.

Not sure how this will play out?  Well, think about your smartphone. If you’ve been using an iPhone for years, switching to Android might seem cheaper or even better on paper, but most people don’t switch. Why? Because everything’s already set up: your photos, apps, passwords, messages… it just works.

That’s how Nvidia works for developers and companies building AI. Once they start using Nvidia’s tools, it’s familiar, reliable, and hard to replace. Even if someone else offers a faster or cheaper chip, it’s a hassle to switch. That stickiness is why Nvidia continues to dominate, even as new competitors try to catch up.

Risks & Red Flags

But as strong as it seems, NVIDIA’s momentum could gradually come down to earth.

H20 AI chips are specifically made for China to comply with U.S. restrictions. They are not nearly the most powerful chips, which is what the Chinese market wants. There’s also been a lot of illegal smuggling to get the product into China – activity that has been just reported since the export restriction went into place. 

What does this mean for NVIDIA? Well, should the company not meet its expected sales in the Chinese market, China could become a liability rather than an income-generating segment. 

It may seem like a reach, but the tightening competition can soon catch up with NVIDIA. 

Huawei is Nvidia’s biggest competitor in China and is aggressively investing in its AI chips, which may affect NVIDIA’s sales by taking away some of its market share. Since NVIDIA’s most powerful AI chips are still not allowed for Chinese export, clients who need those chips may go to a competitor, which is precisely what Huawei is.

Valuation Breakdown

With that in mind, let’s compare NVIDIA to its industry peers.

The stock trades at 43 times forward earnings, a premium relative to Qualcomm, but a discount relative to Broadcom and AMD.

For those unfamiliar with the price-to-earnings ratio, it indicates how much investors are willing to pay for each dollar of earnings. A lower p/e may suggest that the stock is undervalued, or the expectations are generally lower. 

In terms of profitability, NVIDIA’s profit margin is 55.85%, highlighting its dominance over its industry peers.

Now, compared with its peers in the magnificent seven, NVIDIA seems to be trading at a premium with the highest forward p/e at 43.21. At the same time, it has the highest profit margin, which is about 55% than Microsoft. So I guess the premium is slightly justified here. 

Who Should Buy This?

I think it’s fair to say that the primary goal of any investment is to generate a profit. But how we get there depends on our risk appetite. Some investors chase high-yielding stocks, often with higher risk, while others prefer steady, long-term growers, even if the gains are modest. I like to play both sides.