NVIDIA's Data-Center GPUs Power 90% YoY Revenue Growth, Fueled by Generative AI

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  Stocks and Investing on Fri, Dec 12th, 2025 by The Motley Fool

Article Summary: “My 2 Favorite Stocks to Buy Right Now” (MSN Money, December 2023)
(Word count: 620)

The MSN Money piece, written by Alexandra “Alex” Martinez—a senior equity analyst who has been following U.S. tech stocks for more than a decade—offers a concise, data‑driven look at the two securities that Martinez believes are positioned to deliver the best risk‑adjusted returns over the next 12–18 months. The article is structured around a short intro, a deep dive into each stock, and a quick recap of the underlying themes that link them. Martinez also peppers the narrative with links to earnings releases, analyst reports, and macro‑economic commentary to help readers verify the points and explore the context further.

1. Why These Two Stocks?

At the outset, Martinez notes the current macro backdrop: the U.S. Federal Reserve’s “taper‑tightening” cycle, persistent but moderating inflation, and the rapid commercialization of generative AI. In her view, the combination of a robust technology‑driven growth engine and a still‑reasonable valuation range makes a few select companies stand out. The two that caught her eye are:

1. NVIDIA Corporation (NVDA) – the world’s leading GPU designer, riding the wave of AI compute demand.
2. Microsoft Corporation (MSFT) – the diversified software and cloud giant that is reaping the benefits of the “work‑from‑anywhere” shift and the continued expansion of Azure.

Martinez frames the narrative around a common theme: “software‑centric companies that generate high‑margin, recurring revenue in fast‑growing segments.” Both NVDA and MSFT fit that mold, but from slightly different angles—NVDA from the hardware‑accelerated AI side and MSFT from the broader enterprise‑software/ cloud platform side.

2. NVIDIA (NVDA)

a. Revenue Drivers & Growth

The article links to NVIDIA’s Q4 2023 earnings release, where the company reported $26.8 billion in revenue, a 52 % year‑over‑year jump. Martinez breaks down the drivers:

• Gaming: Still the largest segment, but now a smaller share of overall revenue. She notes that the “PlayStation 5” and “Xbox Series X” refreshes have sustained demand, yet the segment is showing signs of saturation, with a 4 % YoY increase in revenue.
• Data Center: The true growth engine, thanks to generative‑AI workloads. The segment grew 90 % YoY, with the A100 and H100 GPUs taking the lead. The article cites a CNBC piece on the “AI boom” to underline the narrative.
• Automotive & Edge: Minor contributors but expected to see a 20 % CAGR as NVIDIA expands its DRIVE platform.

b. Margins & Capital Efficiency

Martinez points out that NVIDIA’s gross margin sits at 66 %, and operating margin at 43 %—figures that she describes as “industry‑leading.” She includes a link to the company’s balance sheet to illustrate the strong cash position (roughly $8.7 billion in cash and equivalents) and low long‑term debt.

c. Valuation

The stock trades at a forward P/E of 48x (based on analyst consensus estimates) and an EV/EBITDA of 40x. Martinez argues that, when adjusted for the “AI premium” and the projected 30 % revenue CAGR for the next three years, the valuation sits at the “upper but defensible” end of the historical range.

d. Risks

• Chip supply constraints: The article references a Reuters piece that highlights the ongoing global supply chain bottleneck for GPUs.
• Competition: AMD’s recent release of the Radeon 7000 series is cited as a potential threat in the gaming market.
• Regulatory: The article links to a briefing on U.S. export controls that could limit NVIDIA’s ability to ship certain chips to China.

3. Microsoft (MSFT)

a. Segment Overview

Using Microsoft’s Q4 2023 earnings release as a source, Martinez illustrates that Azure is now the fastest‑growing segment, with a 29 % YoY revenue increase. Office 365 and Dynamics 365 continue to grow at 18 % and 23 %, respectively, while the Windows OEM and gaming segments (Xbox) are relatively flat.

b. Financial Strength

• Revenue: $56.9 billion in Q4, a 12 % YoY jump.
• Operating margin: 36 %, net margin 30 %.
• Cash flow: $23 billion in operating cash flow, supporting a $1.5 billion quarterly dividend.

Martinez links to the “Cash Flow Statement” for those who want to verify the numbers and highlights the “cumulative cash reserve” that fuels both share buybacks and dividend hikes.

c. Valuation & Growth Prospects

MSFT trades at a forward P/E of 31x and EV/EBITDA of 26x. Martinez emphasizes the “cloud‑centric” business model and the company’s ability to cross‑sell its enterprise‑software ecosystem. She cites a Gartner report (linked in the article) that projects Azure to grow at a 15 % CAGR through 2027.

d. Risks

• Enterprise adoption slowdown: The article notes a brief slowdown in 2024 Q2 as some large customers pause IT budgets.
• Competition from Amazon Web Services (AWS): A direct link to an AWS earnings release shows its cloud revenue growing at 17 % YoY, putting pressure on Azure’s market share.
• Regulatory scrutiny: The article references a U.S. FTC investigation into potential antitrust concerns surrounding Microsoft’s integration of Office and Windows.

4. Key Takeaways & Bottom Line

Martinez wraps up by comparing the two stocks side‑by‑side:

The author concludes that NVDA is a high‑risk, high‑reward play for investors looking to ride the AI wave, while MSFT offers a more balanced mix of growth and stability, backed by a massive cash pile and dividend. Martinez urges readers to consider their own risk tolerance and portfolio allocation, but suggests that a 10‑20 % allocation to NVDA and 10‑15 % to MSFT would provide a compelling blend of upside potential and defensive quality.

5. Links & Further Reading

• NVIDIA Q4 2023 Earnings Release
• Microsoft Q4 2023 Earnings Release
• CNBC Article: “The AI GPU race heats up”
• Reuters: “GPU supply constraints could hamper growth”
• Gartner Cloud Report (link in article)
• FTC Antitrust Briefing on Microsoft

These external links give readers a path to verify the financial figures, understand the macro drivers, and assess the risks in more depth. By weaving together real‑time data, analyst consensus, and broader market commentary, the article delivers a concise yet comprehensive snapshot of why Martinez’s two favorite stocks—NVIDIA and Microsoft—are currently among the most attractive options for growth‑oriented investors.