A Magnificent Stock Run in 2024
NVIDIA Corporation (NVDA) has been outstripping expectations in 2024, with its stock skyrocketing by a staggering 135.6% year to date (YTD). This incredible surge has propelled NVIDIA to the echelons of top performers in the semiconductor industry, leaving counterparts like the Zacks Semiconductor – General industry and The Technology Select Sector SPDR Fund XLK ETF behind in the dust, as they clocked gains of 102.2% and 14.4% respectively.
As of the latest close, NVIDIA holds a market capitalization of $2.87 trillion—now ranking as the third most valuable publicly traded U.S. company. The company stands right behind tech behemoths Apple Inc. (AAPL) and Microsoft Corporation (MSFT), with both reporting positive YTD gains of 17.2% and 11.9% respectively. However, NVIDIA has sprinted miles ahead, underscoring its robust position in the tech realm.
The Potential for Further Growth
Amidst the remarkable stock rally, potential investors are pondering whether NVIDIA stock still holds promise for greater growth. The dynamism in play behind NVIDIA’s stock upsurge stems from its dominant position within the burgeoning domain of artificial intelligence (AI), especially in the realm of generative AI. The anticipation that NVIDIA will reap significant benefits from burgeoning investments in AI has ignited this upward trajectory.
Enterprises spanning various industries are gearing up to refashion their operational frameworks, escalating the demand for generative AI applications. Market projections indicate that the global generative AI market is poised to hit $967.6 billion by 2032, expanding at a compound annual growth rate (CAGR) of 39.6% from 2024 to 2032.
This anticipated AI boom necessitates substantial computational power, a realm where NVIDIA’s high-performance chips hold a unique edge. With the company’s GPUs already serving as a linchpin in AI models, the surge in AI investments by businesses will drive the imperative for network infrastructure upgrades. NVIDIA’s cutting-edge chips, revered for their robust computing prowess, are primed to become the preferred choice for enterprises eyeing AI integration.
Projections for NVIDIA’s third-quarter fiscal 2025 revenues paint a compelling picture, with estimates standing tall at $32.5 billion—a hefty leap from the $18.12 billion recorded in the corresponding quarter last year. This rapid revenue ascent underscores NVIDIA’s pivotal role in the AI narrative, cementing its standing as a key player in the semiconductor realm.
The Financial Fortitude and Bright Prospects of NVIDIA
NVIDIA’s financials narrate a tale of triumph. In its second-quarter fiscal 2025 report, the company showcased a jaw-dropping 122% year-over-year surge in revenues, coupled with a striking 152% rise in non-GAAP earnings per share (EPS). These robust financial indicators speak volumes about NVIDIA’s consistent delivery of stellar performance, even amidst the throes of a competitive market landscape.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 and 2026 earnings charts a path of sustained growth, reflecting unwavering confidence in the company’s capacity to uphold its leadership mantle in domains like gaming, data centers, automotive, and professional visualization.
Yet another feather in NVIDIA’s cap is its financial stability. As of July 28, 2024, the company reported cash and cash equivalents of $34.8 billion, marking a climb from $31.44 billion in April 2024. This substantial cash reservoir not only fortifies NVIDIA against potential market volatility but also grants leeway for investments in forthcoming growth avenues.
Is NVIDIA Stock Reaching Overvaluation?
Despite NVIDIA’s remarkable show, concerns over the stock’s valuation may be ruffling some feathers. Presently, NVIDIA trades at a one-year forward price-to-earnings (P/E) ratio of 34.09. While this figure overshoots the Computer and Technology sector’s forward P/E multiple of 26.74X, the premium resonates with NVIDIA’s unwavering financial outperformance and sizable growth potential in burgeoning sectors like AI and autonomous vehicles.
It’s vital for investors to grasp that NVIDIA isn’t merely a chipmaker—it’s a torchbearer in furnishing the essential infrastructure for AI applications. This distinctive edge positions NVIDIA favorably as AI continues its industry-altering tide, justifying the company’s loftier valuation.
Final Verdict: A Bullish Call on NVIDIA Stock
While NVIDIA’s stock has ascended by approximately 136% this year, the crescendo of its growth narrative is far from halting. The company’s preeminent stance in the AI and semiconductor spheres, in tandem with its commendable financial performance and expanding market footprint, beckon towards a landscape teeming with potential growth opportunities. For those eyeing a stake in the AI revolution and NVIDIA’s strategic leadership, this stock stands out as a compelling proposition.
NVIDIA presently holds a Zacks Rank #2 (Buy) and boasts a VGM Score of B. Our analyses underscore that stocks with a VGM Score of A or B, coupled with a Zacks Rank #1 (Strong Buy) or #2, wield optimal investment allure. The case for NVDA stock being a riveting investment avenue is strong at this juncture.
