Nvidia (NVDA), a name synonymous with cutting-edge technology and innovation, has recently reached a new zenith, achieving an all-time high of $553.46 recently.
This remarkable milestone came after the stock broke out of a flat base on January 8. The surge in NVDA stock, which has seen a 10% increase in January alone, prompting the question: is this the right time to buy?
NVDA’s rise to the top
The stock’s trajectory is impressive, pacing to eclipse Amazon.com (AMZN) as the fourth-largest company by market capitalization. This growth is not just a testament to Nvidia’s market performance but also a reflection of its strategic advancements in the realm of artificial intelligence chips.
Nvidia announced the launch of new GeForce graphic processors designed for AI-enabled laptops and PCs. Additionally, the company revealed its foray into the electric vehicle market, with its automated driving system being adopted by EV manufacturers such as Li Auto (LI) and others, who have chosen Nvidia Drive Thor for their fleets.
The announcement catalyzed a positive market response, with shares rallying 5% from a buy point of 505.48, propelling the stock towards becoming the fourth-biggest company by market cap.
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NVDA’s spectacular 2023
Nvidia’s journey in 2023 was nothing short of spectacular, rallying 239% and hitting an all-time high of 505.48 just before the year concluded. The company crossed the 505.48 buy point of its base on January 8 with robust trading volume.
Looking forward, Nvidia is gearing up to release its fourth-quarter results on February 21. The anticipation is high, given the company’s history of exceeding expectations.
For instance, just ahead of the third-quarter earnings in November, Nvidia broke out of a double-bottom base. At the SC23 supercomputing conference in Denver, the company announced a new artificial intelligence computing platform and an advanced data-center chip, propelling the stock to new heights.
NVDA’s earnings per share
Despite delivering a blockbuster quarter, shares dipped post-earnings report. Nvidia reported profits of $4.02 per share on sales of $18.12 billion for the period ending October 29, surpassing the analysts’ expectations of $3.37 per share on sales of $16.19 billion.
Compared to the same quarter in the previous year, Nvidia’s earnings soared by 593%, with sales seeing a 206% increase. This period marked the second consecutive quarter of triple-digit growth in both revenue and earnings.
NVDA’s data center growth
The surge in demand from data centers was a primary growth driver. Nvidia’s data center sales skyrocketed by 279% from the previous year, reaching a record $14.51 billion and a 41% increase from the second quarter.
With its earnings report, Nvidia projected an ambitious sales target of $20 billion for the fourth quarter ending in January, indicating a 231% growth from the prior year and surpassing analysts’ expectations of $17.96 billion.
Analysts are now forecasting a 236% growth in per-share earnings to $11.22 for fiscal 2024, which ends this month. After this period, profit growth is expected to decrease to 67% in fiscal 2025.
Nvidia’s journey to becoming a market leader began with its pioneering role in graphics processors, significantly enhancing computer gaming.
NVDA’s real-world use case
Today, Nvidia’s chips are integral in diverse industries such as healthcare, automobiles, and robotics. In March, the generative AI scene witnessed a major leap with OpenAI’s ChatGPT, with Nvidia’s AI-capable supercomputer playing a crucial role, leading to what the company calls the “iPhone moment of AI.”
This technological advancement turned the tide for Nvidia, which had experienced declining sales and earnings in previous quarters. However, the company bounced back with record growth in both revenue and profits in the two most recent quarters.
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NVDA vs AMD
Yet, competition is heating up. In December, Advanced Micro Devices (AMD) launched a new AI chip, directly competing with Nvidia’s advanced products.
Despite this, Nvidia’s stock exhibits exceptional technical strength, boasting a perfect score of 99 on both its Composite Rating and EPS Rating. Its Relative Strength Rating of 97 underscores its performance, outdoing the vast majority of stocks in the Investor’s Business Daily database.
Nvidia is also celebrated as one of the “Magnificent Seven” stocks that led the 2023 stock rally, a group including tech giants like Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), Tesla (TSLA), and Amazon (AMZN).
These tech titans, many of which rely on Nvidia’s advanced chips, underscore the company’s pivotal role in the tech industry. It’s also noted as one of the “Magnificent Seven of 2024.”
NVDA, a Semiconductor giant
NVDA stock currently leads in the fabless semiconductor group and is a frequent feature on the IBD 50, IBD Sector Leaders and Tech Leaders lists. It’s also a part of the IBD Leaderboard. In November, NVDA stock soared by 15%, surpassing the Nasdaq’s 10.70% gain.
December saw a more modest increase of 6%, just above the Nasdaq’s 5.5% rise.
However, the Accumulation/Distribution Rating for NVDA stock is D+, indicating that institutional buyer interest has waned in the last 13 weeks. Despite a strong third quarter and a positive growth outlook, there hasn’t been a significant net investment in the stock by funds, suggesting that there might be better opportunities available.
The expected growth of AI
Yet, the global AI chip revenue is projected to grow 26% from $53.4 billion in 2023 to $67.1 billion in 2024, according to Gartner, and is expected to double by 2027 to $119 billion. Bank of America analyst Vivek Arya has set a price target of 700 for the AI leader, a sentiment echoed by Bernstein analyst Stacy Rasgon, who also finds the company’s valuation attractive.
In conclusion, NVDA stock is a compelling buy right now. Nvidia’s robust market position and promising future prospects in the evolving landscape of AI and technology make it a compelling buy.
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I’m Nathan Goldstein, a writer and political analyst focused on simplifying complex social and political issues. My writing breaks down the intricacies of today’s society and politics to make them more understandable for you. I’m committed to providing clear and well-informed insights.