Nvidia hits a new high but still underperforms: Why is Wall Street even more confident in the bullish outlook?

Against the backdrop of a potential shift in the expansion of AI computing demand and capital return strategies, NVIDIA (NVDA.O) is once again becoming the focus of Wall Street.

Although the company’s share price hit a new all-time high on Monday for the first time since October last year, its gains so far this year still lag significantly behind the overall performance of the semiconductor sector. This “lag” has instead become an important basis for some institutions to stay bullish.

The Philadelphia Semiconductor Index rose more than 36% in April and is nearly 50% above the 200-day moving average. A Goldman Sachs trading desk said that degree of deviation is rare since the dot-com bubble. By comparison, NVIDIA’s gains in the same period were only just over 20%.

When the time horizon is extended from 2026 to the present, the gap widens further: NVIDIA is up about 15% year-to-date, while the index overall has risen close to 46%.

In its report, Trivariate Research noted that over the past 3 months, among all semiconductor and equipment stocks, NVIDIA ranks only 49th in performance. Even with a recent rebound, its relative performance remains at the low end.

This structural gap is prompting the market to start reassessing NVIDIA’s valuation and room for strategy. Bank of America analyst Vivek Arya believes that as investments across the ecosystem are gradually completed, the company has the ability to reduce the intensity of capital expenditures and shift its focus toward shareholder returns, including increasing dividends and expanding the scale of share repurchases.

This change may attract more income-oriented capital while also easing market concerns about mergers and acquisitions and supply-chain financing, thereby driving a valuation recovery.

Currently, NVIDIA’s level of shareholder returns is clearly on the low side. The company’s quarterly dividend is only 1 cent per share, implying a dividend yield of about 0.02%, far below the peers’ average of 0.89%. Bank of America estimates that if the dividend yield were raised to 0.5% to 1%, it would approach levels around 0.4% for Apple (AAPL.O) and about 0.8% for Microsoft (MSFT.O).

The funding required to achieve this target is approximately $26 billion to $51 billion, accounting for 15% to 30% of 2026 free cash flow. This would still allow the company to balance share repurchases and ecosystem investment.

Trivariate’s Adam Parker, looking at NVIDIA’s long-term market capitalization potential, believes the company has the opportunity to move toward a $10 trillion market cap by 2030. He pointed out that the company is “essentially more like an industry rather than a single company,” so when investors consider realizing gains in stages, it instead creates a new buying logic.

Support on the demand side is also strengthening. JPMorgan analyst Harlan Sur expects AI-related demand will drive multi-year growth in NVIDIA’s data center GPU business. At the same time, near-term industry momentum is driven more by CPU vendors.

Intel (INTC.O) posted much stronger-than-expected first-quarter earnings, lifting the stock price by nearly 24% in a single day, and Advanced Micro Devices (AMD.O) also benefited in parallel.

On the supply side, the early locking in of computing power demand is increasing industry visibility. JPMorgan noted that customers are pre-committing capacity to meet expected growth in future computing demand, resulting in NVIDIA and Broadcom (AVGO.O) having longer-cycle order backlogs going into fiscal 2027. For its part, the company has also disclosed that demand visibility for its Blackwell and Vera Rubin architecture products has already exceeded $1 trillion.

Even though the mid- to long-term logic is clear, the short-term outlook still faces key variables. This week, major cloud computing customers—including Amazon (AMZN.O), Meta(META.O), Microsoft (MSFT.O), and Alphabet(GOOGL.O)—are set to release their earnings reports. Their capital expenditure and AI investment timing could directly affect the market’s assessment of NVIDIA’s growth path.

A Wedbush team led by Dan Ives expects that ahead of the earnings disclosures from large technology companies, the market will continue to focus on AI monetization capabilities and capital expenditure trends, and overall performance this week still has the potential to remain strong. NVIDIA itself is expected to release its next earnings report on May 20.

Institutional views are broadly bullish. Visible Alpha data shows that among 13 tracked analysts, 12 have issued “Buy” ratings, with an average target price of about $268—still offering approximately 24% upside from current levels.