On Thursday, corporate bond research firm Gimme Credit initiated coverage of NVIDIA's (NVDA) 2030 corporate bond issue with a buy recommendation, highlighting the company's strong performance driven by its significant role in the artificial intelligence (AI) market.
The firm noted that Nvidia (NASDAQ:NVDA), known for its dominance in the GPU market, boasts a market share exceeding 85% and has seen its revenue more than triple in the fiscal first quarter that ended April 28th, largely due to demand for its Hopper GPU computing platform.
Analysts believe the company's success is not showing signs of slowing down, with expectations for revenue to more than double in the second quarter and for the full fiscal year.
The firm explains that Nvidia's data center market, serving hyperscale cloud providers, is the main revenue generator, contributing over 85% to the total. Other significant buyers include enterprise, consumer internet firms, and sovereigns, with automotive expected to be the largest vertical within the data center sector this year.
In addition, Gimme Credit says Nvidia's financial health appears robust, with nearly $27 billion in free cash flow generated in fiscal 2024. The anticipated revenue growth and improved margins could see this figure soar to an estimated $58 billion this year. Analysts state that the company's leverage is remarkably low, with debt at $10 billion and fiscal 2024 EBITDA of more than $34 billion, resulting in a leverage ratio of 0.3x at the start of the year, which is projected to drop to 0.1x.
While Nvidia faces competition from the likes of Advanced Micro Devices and Intel, as well as potential challenges such as export control restrictions in China and global tariff wars, these factors are not currently seen as significant threats to its continued revenue growth and operating margin expansion.
Gimme Credit's buy recommendation comes with the 2030 bond issue trading at a spread of +36, reflecting confidence in Nvidia's financial strength and market position.