The Rise of NVIDIA
As the curtains drew on 2023, NVIDIA Corporation’s NVDA shares basked in glory, kicking off the new year with a meteoric rise. The trailblazer in graphic processing units (GPUs) etched history on Feb 22 with the largest one-day gain Wall Street has ever witnessed, riding high on an artificial intelligence (AI) frenzy.
A Feat Beyond Compare
NVIDIA’s shares have soared by a remarkable 70.8% this year, outpacing the Semiconductor – General industry’s surge of 48.5%. Currently, NVIDIA proudly holds the mantle of being the third-largest company in the U.S., standing tall only behind Microsoft Corporation and Apple Inc.
Dispelling Bubble Myths
Amidst its stellar performance, skeptics have raised concerns, labeling NVIDIA’s stock as a potential bubble. However, contrary to popular belief, NVIDIA’s stock rally isn’t a bubble waiting to burst. The upsurge is anchored in robust fundamental factors rather than speculative forces.
The AI Frenzy Unveiled
The perpetually growing demand for AI models serves as a bedrock across various sectors. Notably, Meta Platforms, Inc. affirms that AI tools have amplified revenues from ad campaigns, while UBS Group AG foresees AI integration as a stimulant for productivity expansion over the upcoming triennium.
NVIDIA’s Strategic Position
NVIDIA’s chips act as a pivotal component in AI models spanning from manufacturing to cloud computing. The unflagging demand for NVIDIA’s H100 graphic cards underscores their supremacy in the AI chip domain, propelling revenues and earnings upward.
Financial Fortitude
Exhibiting formidable financials, NVIDIA’s fiscal fourth-quarter revenues surged to $22.1 billion, marking a colossal 265% escalation from the previous year. Moreover, the company’s earnings per share for the quarter ending Jan 28, 2024, reached $4.93, catapulting by a staggering 765% from the corresponding period in the antecedent year.
Strategic Expansion
Anticipating further growth, NVIDIA is set to roll out the B200 Blackwell graphics card in partnership with Taiwan Semiconductor Manufacturing. Supported by U.S. government funding, this robust AI graphics card is poised to bolster NVIDIA’s revenue streams, with projections for the ongoing quarter reaching the $24 billion benchmark, well above estimates.
The AI boom encompassing NVIDIA and its contemporaries diverges from the speculative frenzy of the late ’90s dot-com era. Tech giants today focus on deploying generative AI technology effectively, flaunting market capitalizations double those witnessed during the tech bubble. Elevated profit margins and superior return on capital accentuate the substantial business integrity, justifying the current stock valuations.
Positioned as a market favorite, NVIDIA promises latent long-term growth prospects for astute investors to capitalize on. With anticipated earnings growth rates of 84% for the current year and 14.1% for the following year, alongside revenue growth estimates of 73.8% and 17.9%, NVIDIA’s ascent appears unhindered. Furthermore, the company’s Zacks Rank #1 (Strong Buy) and a Growth Score of B underscore the uncharted potential for growth investors.
Boasting an impressive net profit margin of 48.9%, well above the 20% benchmark, NVIDIA exhibits a robust ability to convert sales into profits, adeptly navigating operational costs. With cash and cash equivalents totaling $25.98 billion as of Jan 28, 2024, NVIDIA bolsters its immunity to market perturbations, securing a stable financial edifice.