Krungsri Securities explores the key investment thesis for NVIDIA in 2026, focusing on the continued upward trend of the AI capital expenditure cycle and the company’s strategic market positioning. The analysis delves into NVIDIA’s competitive strengths, financial health, emerging growth drivers, and the potential risks facing investors. Key investment thesis are:
AI CAPEX cycle driven: The AI investment cycle (AI CAPEX cycle) is expected to continue its robust growth in 2026F, with the market estimating hyperscaler investment growth of over 40%. Although capital expenditure is rapidly increasing, it still primarily comes from internal cash flow, and the leading operators maintain strong financial positions. Thus, high investment levels are expected to persist. Meanwhile, NVIDIA holds a market share of over 80% in the current mainstream AI Data Center chip segment, along with an annual R&D investment of about USD 10 billion, which helps maintain strong competitiveness and remains a key driver of company growth.
Ecosystem mitigates competition risk: Although there is growing momentum for hyperscalers to develop their own data center processing chips (ASIC), and AMD remains a rival, NVIDIA’s strengths make it costly for customers to switch brands. NVIDIA’s hardware is integrated with “CUDA” software for optimal performance. Furthermore, NVIDIA has shifted from selling standalone chips to a “server cabinet system (NVLink)” model. The sales momentum of new products, Blackwell and Rubin, leads the market to forecast that fiscal year 2027F profit (ending Jan 27) will still grow by 90.6%.
New S Curve: The company is advancing into a new S-Curve with the DRIVE Thor platform for autonomous vehicles, and Project GROOT/Isaac for industrial robots and humanoids. According to Mordor Intelligence and McKinsey, the AI market in robotics and automotive is projected to grow at an average CAGR of over 30-40% until 2030. This is both risk diversification and expansion into new markets as significant as Data Centers.
M&A: The fabless business model eliminates the need for investment in chip manufacturing plants. For the fiscal year 2026, NVIDIA’s cash flow from operations (CFO) is close to USD 100 billion, with cash on hand of USD 62.5 billion and a net cash position of USD 110 billion in shareholder equity. These strong financials provide the ability for M&A to enhance competitive strength, as well as opportunities for share buybacks and returning value to shareholders.
Valuation & Action: The stock price has declined due to Middle East conflict risks, reducing the Forward P/E to 17 times (-1 S.D.), contrasting with the sector which has revised up NVIDIA’s earnings forecast by 38% over the past six months. Furthermore, current EPS growth momentum is at 90.6%, close to the past five-year annual average profit growth of about 94%. We see both short-term investment opportunities with potential valuation recovery to the average, as well as medium- to long-term potential as a high-quality stock. Currently, 75 out of 79 consensus analysts recommend ‘Buy’, with an average target price of USD 270, giving an upside of 52%.
Krungsri Securities states that investors can invest in NVIDIA shares via NVDA.US (Krungsri iGlobal) or DR NVDA80.
Main risks:
- Prolonged Middle East conflict, affecting the overall economy and hyperscaler investment budgets
- Middle East conflict causing supply chain disruptions and impacting product deliveries
