Nvidia’s Dominance in AI Chips Sparks Soaring Success
Over the past year, Nvidia shares have skyrocketed more than 250% on the heels of profound growth in earnings, reaching historic highs. Central to Nvidia’s astounding success is its unassailable position in the realm of artificial intelligence (AI) chips.
Commanding an 80% share in this rapidly expanding market, Nvidia not only leads in AI chips but also offers a diverse array of products and services for businesses venturing into AI projects. Revenue stemming from these AI-related ventures, reported under Nvidia’s data center business, has experienced a meteoric rise in recent times, hinting at further gains for the robust stock.
Image source: Getty Images.
As evidenced by the chart below, Nvidia’s data center revenue has exhibited steady quarterly growth since late 2020, with a significant surge noted in the fiscal year 2024. Transitioning from the fourth quarter of fiscal 2023 to the fourth quarter of fiscal 2024, data center revenue catapulted over 400% to an unprecedented total exceeding $18 billion.
Data source: Statista.
Poised for Continued Growth and Innovation
This remarkable growth trajectory, alongside other strategic elements, foreshadows continued prosperity for Nvidia. Firstly, Nvidia’s prominent position in a market predicted by analysts to exceed $1 trillion by the decade’s end underscores its potential for further gains. Secondly, by ramping up investments in research and development, Nvidia aims to maintain a competitive edge over its counterparts.
Furthermore, Nvidia is just embarking on its narrative of growth in AI software, a realm CEO Jensen Huang anticipates as holding substantial promise.
Notably, Nvidia’s shares are trading at approximately 34 times forward earnings estimates, a valuation deemed reasonable for a front-runner in a high-growth domain. Consequently, for investors eyeing opportunities within the AI sector, Nvidia emerges as a compelling choice. Even amidst its impressive surge, the stock may possess ample room for prolonged advancement over time.
Should you invest $1,000 in Nvidia right now?
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.