A perception had gained ground (and perhaps still holds) that chip giant and the world's most valuable company by market cap, Nvidia (NVDA), would see its dominance in the AI world diminish due to its perceived weakness in inference. Inference is basically the real-world test for models, which have been trained on large datasets. The trained models apply what they “learned” to answer questions, classify images, translate text, or generate content.
To address this, late last year, Nvidia made its largest acquisition ever: buying AI startup Groq for $20 billion. Except this was not a buyout; it was a licensing agreement. Essentially, the contours of this agreement involved Nvidia gaining access to Groq's low-latency inference technology and Groq remaining an independent company. However, the optics were that of a purchase, as the then-CEO and COO of Groq, Jonathan Ross and Sunny Madra, respectively, joined Nvidia.
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The Department of Justice may have something to say about it now.
www.barchart.com Deal Under DOJ's Lens
According to a Bloomberg report, the DoJ has taken issue with how Nvidia licensed the Groq deal. Not explicitly stated, but the Department may be of the view that the deal was toned down to a licensing agreement to avoid antitrust scrutiny. Earlier, some U.S. lawmakers questioned the deal as well.
Senators Elizabeth Warren and Richard Blumenthal, the Democratic representatives for Massachusetts and Connecticut, respectively, described the agreement as potential “reverse acquihires” and alleged that the structure could allow Nvidia to consolidate a potential competitor without triggering conventional merger review. They also contended that with this, the U.S. could cede “technological leadership to China.”
But this has not been the company's first rodeo with regulators. In 2024, the DOJ opened investigations into whether Nvidia was abusing its dominant position in the GPU market and unfairly hurting competition. Similar investigations are also ongoing in France, although they are supposed to be nearing the end.
Investigations also remain open in China, an erstwhile key market for the company before it stopped reporting any sales altogether from the world's second-largest economy due to export controls. Here, the matter pertained to its $7 billion acquisition of Israeli-American semiconductor company Mellanox. The Chinese regulators were also involved, as the acquisition was a global one. Although it was approved in 2020, in 2024 Chinese authorities started a probe into the deal. In September 2025, a preliminary finding found that Nvidia had violated the country's anti-monopoly law. Nvidia, for its part, denied any wrongdoing.
Nvidia Remains Unstoppable
Having said that, nothing has been able to stop the Nvidia juggernaut so far, with the stock outperforming the S&P 500 ($SPX) again this year, rising by 17% on a year-to-date (YTD) basis. Moreover, its most recent set of numbers for fiscal Q2 2027 reinforced the optimism around the company.
Turning to the second quarter of fiscal 2027, Nvidia reported revenue of $96.2 billion, marking a 106% increase YoY and surpassing consensus estimates. Data center revenue grew 117% YoY to $89 billion. For the third quarter of fiscal 2027, Nvidia guided for total revenue of $108 billion, plus or minus 2%.
Earnings per share rose 120% YoY to $2.22, exceeding the consensus estimate of $2.09 and extending Nvidia’s streak of consecutive earnings beats to nine quarters.
Gross margins improved to 75% from 72.4% in the year-earlier period. The company’s projected gross margin range of 73.5% to 74.5% for the third quarter of 2027 attracted criticism from some observers looking for potential weaknesses in the investment thesis. Nevertheless, Nvidia shares rose following the second-quarter results, ending a four-quarter run in which the stock declined immediately after earnings releases.
A key highlight from the second quarter earnings discussion was the plan by Amazon Web Services, a leading cloud provider, to deploy 2 million Nvidia graphics processing units beginning in the current quarter and continuing through the second quarter of fiscal 2029. This development helps address concerns that major hyperscalers might develop their own chips or application-specific integrated circuits and reduce reliance on Nvidia’s products.
Net cash from operating activities in the second quarter increased to $24.1 billion from $15.4 billion in the year-ago period. This figure included $7.8 billion in gains from equity investments in companies such as OpenAI, SpaceX (SPCX), CoreWeave (CRWV), and Nebius (NBIS). At the same time, accounts receivable rose by a substantial $22.3 billion during the quarter, a change that has contributed to ongoing discussions about potential circular financing arrangements.
Nvidia closed the quarter with $22.4 billion in cash, well above its short-term debt balance of $1 billion.
And amid all this, NVDA stock continues to trade at reasonable levels. Its forward P/E, P/S, and P/CF are 24.04, 13.13, and 25.89, respectively. Neither is trading at a significant premium to the sector medians of 22.74, 3.39, and 19.54, respectively.
Analyst Opinion of NVDA Stock
Thus, analysts remain bullish about Nvidia and have earmarked for it an overall rating of “Strong Buy.” The mean target price of $326.09 indicates a potential upside of 49% from current levels. Out of 50 analysts covering NVDA stock, 45 have a “Strong Buy” rating, three have a “Moderate Buy” rating, one has a “Hold” rating, and one has a “Strong Sell” rating.
www.barchart.com On the date of publication, Pathikrit Bose had a position in: NVDA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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