Nvidia’s stock soared Monday to its highest since October of last year, but the semiconductor giant’s results this year have lagged those of its peers. Still, some think the stock is poised to catch up significantly, with one analyst noting that Nvidia could soon shift its focus to shareholder returns through share buybacks and dividends. The Philadelphia Semiconductor Index rose more than 36% in April and is trading nearly 50% above its 200-day moving average. This is “a distance not seen since the peak of the dot-com bubble,” Goldman Sachs traders observed over the weekend. Nvidia has risen over the same period, but it’s up more than 20%, lagging the broader index. This is noteworthy since the company accounts for the largest single component of the index at 10.82%. The gap between the semiconductor giant and its peers is even wider since the beginning of the year, with Nvidia up 15% compared to about 46% for the Philadelphia Semiconductor Index. “We looked at the performance of all semiconductor and semiconductor capital equipment stocks and estimated which stock was the 49th best performer over the past three months, even if it was strong from its bottom this month – NVDA!” Analysts at Trivariate Research wrote in a weekend note to investors. NVDA SOXX 3M Comparison of Nvidia and SOX over the past 3 months. Focus on greater returns for investors Analysts see a number of reasons why Nvidia’s performance could rise compared to its competitors in the coming quarters. Nvidia’s dominance in graphics processing units (GPUs) puts it in a good position to increase returns to shareholders and boost its stock price by reducing investment and capital expenditures. “With most of the ecosystem investments likely to be completed, NVDA could shift its focus to shareholder returns, increasing ownership across dividend- and income-focused funds, alleviating concerns about large unexpected M&A or noisy vendor financing, and potentially supporting a legitimate rerating from its currently discounted rating,” Bank of America analyst Vivek Arya and colleagues wrote in a Monday note. Trivariate’s Adam Parker makes a similar assumption, seeing investors have the opportunity to make more money as NVIDIA’s market cap rises from its current level of over $5 trillion to $10 trillion by 2030. “If investors feel compelled to take profits, we think it makes sense to buy NVDA,” they wrote. “Due to the fact that we are a sector rather than a stock, we believe this company has a good chance of becoming a $10 trillion market cap company by the end of this decade.” Nvidia currently pays a minimum quarterly dividend of 1 cent per share, and currently yields just 0.02%. According to Bank of America, companies comparable to NVIDIA have an average dividend yield of 0.89%. The company noted that its free cash flow earnings also lag behind its peers. “We think NVDA could at least consider increasing its dividend yield from its current paltry 0.02% to 0.5% to 1%, in line with Apple’s 0.4% and Microsoft’s 0.8%,” Bank of America’s Arya said in an analysis Monday. To offer the higher yield, it would only need $26 billion to $51 billion, or 15% to 30% of its free cash flow in 2026, leaving “enough cash for other uses, such as stock buybacks and ecosystem investments,” he said. Nvidia is also looking to benefit from the increasingly certain demand for AI computing overall. “We expect AI-related demand to drive multi-year growth in NVDA’s data center GPU business,” JPMorgan analyst Harlan Sarr and colleagues wrote in a note Monday. The surge in semiconductors in the first quarter has so far been driven by traditional central processing units (CPUs), which have seen strong demand through the AI boom. Intel’s first-quarter adjusted earnings were revised significantly higher last week, and the stock rose nearly 24% the day after the earnings release. Shares of fellow CPU maker Advanced Micro Devices also benefited from the news. More Expansion in the Short-Term In the near-term, Wall Street believes the company will continue to vertically invest and expand both upstream and downstream of its core GPU business. “Our hardware team has developed an initial capex outlook for 2027 of +40% growth,” JPMorgan analysts said Monday. “NVDA and AVGO have both discussed increased visibility (backlog) through CY27 to help customers proactively secure capacity well in advance of deployment as compute demand is expected to increase dramatically.”
