Key Points
Nvidia's $78.0 billion revenue guide suggests the AI chip boom is still accelerating.
While management's guidance implies faster year-over-year growth, there's still reason to be cautious about the sustainability of these growth rates.
The stock's valuation already reflects strong growth from Nvidia for years to come.
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Chipmaker Nvidia (NASDAQ: NVDA) just reminded investors how unusual this AI cycle still is. The company reported fiscal fourth-quarter revenue of $68.1 billion and then guided to extraordinary $78.0 billion in first-quarter fiscal 2027 revenue, plus or minus 2%.
That is a staggering number on its own. But the more telling point is what it implies about growth: Against revenue of $44.1 billion in the year-ago quarter, Nvidia's midpoint guide calls for about 77% year-over-year growth -- a significant acceleration over its fiscal fourth-quarter year-over-year growth rate.
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Incredible momentum
Nvidia's latest quarter was already an acceleration. Revenue rose 73% year over year in fiscal Q4, up from 62% growth in fiscal Q3.
The core driver of Nvidia's growth remains the same: its data center segment. In other words, the AI boom. Nvidia said data center revenue rose 75% year over year in fiscal Q4 to $62.3 billion, showing how the AI chip build-out remains the dominant part of Nvidia's growth story.
One of the reasons the demand for AI is increasing so fast is because of companies' growing appetite for agentic AI, or the automation of using AI with minimal human oversight.
"We have now seen the inflection of agentic AI and the usefulness of agents across the world and enterprises everywhere," said Nvidia CEO Jensen Huang during the company's fiscal fourth-quarter earnings call. "You are seeing incredible compute demand because of it."
This helps explain why Nvidia's revenue growth has been accelerating and why management is calling for such a huge fiscal first quarter. And it'd be difficult to overstate just how incredible Nvidia's revenue guidance is. In fact, one detail in the outlook is easy to miss but important: Nvidia said it is not assuming any data center compute revenue from China in its first-quarter forecast. In other words, the $78.0 billion guide is coming without help from a market that used to be meaningful.
Of course, this isn't just a top-line growth story. Nvidia's profitability is holding up, too. Nvidia's generally accepted accounting principles (GAAP) gross margin was 75% in fiscal Q4, up from 73% in the year-ago quarter.
In short, the company is growing at an extraordinary, accelerating rate -- and doing so with very high margins.
The risk: sequential growth is cooling
But the key question is not whether Nvidia can grow year over year. It is whether the pace is starting to top out.
This is where the sequential trend comes in. Nvidia's revenue in fiscal Q4 rose 20% from the prior quarter. The midpoint of its fiscal Q1 guide implies about 15% sequential growth. For a typical company, a 15% quarter-over-quarter jump would be exceptional. For Nvidia, however, a step-down like that is the kind of detail the market will scrutinize, because this boom has been defined by rapid sequential ramps. In short, a sequential deceleration could signal that we are near a top to this trend of accelerating year-over-year growth rates.
Then there's Nvidia's high valuation. As of this writing, shares trade at about 46 times earnings. A multiple like that already assumes strong double-digit top and bottom-line growth for years to come.
None of this is to say Nvidia's growth could disappoint anytime soon. But if revenue trends continue to decelerate sequentially, it could suggest we are nearing peak demand for this AI build-out and affect the investment thesis for Nvidia stock.
In the meantime, Nvidia is still executing extremely well. The guidance implies another acceleration in year-over-year growth, and the company is doing it while explicitly excluding China data center compute revenue from its outlook.
Still, I would be cautious at this price. Nvidia can keep delivering spectacular business results and still disappoint shareholders if growth cools even modestly.
That said, Nvidia's guidance for even faster year-over-year revenue growth strengthens the bull case. The sequential trend is just a reason to be cautious about buying the stock at today's valuation, which seems closer to fairly valued than undervalued.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
