NVIDIA recently collaborated with Vertiv to establish the Colosseum AI data center in Italy, strengthening its position in the AI sector. Despite the announcement, NVIDIA's stock experienced a 12% decline over the past week, coinciding with a broader market downturn of 4.4%. This price movement may have been influenced by the announcement but also reflects overall market trends, as technology stocks faced numerous challenges amid tariff uncertainties and Federal Reserve concerns. Within a week marked by varied performance among tech giants, NVIDIA's developments provided slight resistance to the prevailing negative market sentiment.

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The recent collaboration between NVIDIA and Vertiv for the establishment of the Colosseum AI data center in Italy could bolster NVIDIA's foothold in the AI sector, potentially impacting its revenue and earnings positively by enhancing its AI capacities. However, despite this development, NVIDIA's shares recorded a 12% decline in the past week, highlighting broader market turbulence as a possible influence, in addition to the specific announcement. In the backdrop of these short-term dynamics, NVIDIA's total return over five years was very large at 1209.64%, indicating substantial growth compared to a relatively stable US semiconductor industry in the past year.

Over the longer term, NVIDIA's earnings growth of 146.9% in the last year starkly contrasts with the semiconductor industry's 5.9% decline, reflecting its stronger recent performance. With a current share price of US$104.49 and an analyst price target of US$166.59, there's a potential upside of 37.3%, assuming financial metrics align with forecasted earnings and revenue developments. The partnership with Toyota and Uber can further NVIDIA's AI reach in the automotive sector, likely fueling long-term revenue streams. Analysts forecast NVIDIA's earnings to reach US$158.8 billion by 2028, with a necessary PE ratio of 32.2x to justify current price targets, presenting both opportunities and challenges ahead.

In light of our recent valuation report, it seems possible that NVIDIA is trading behind its estimated value.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include NasdaqGS:NVDA.

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