The past few years have seen an unprecedented increase in artificial intelligence (AI) in various areas of life. To capitalize on this expansion, companies involved in this space are at the forefront of the next big thing in AI applications.
Of all the important players, Nvidia (NASDAQ: NVDA) has definitely been the focus, achieving a jaw-dropping 2,300% increase in the last five years (at the time of this writing), cementing its position as one of the most remarkable growth stories in the art space. Importantly, investors have been eager to capitalize on its success as the company rides the AI wave with chips for data centers and graphics.
The stock’s 199% one-year return is a sign of its continued strength in the artificial intelligence space, fueled by the explosion in demand for GPUs (graphics processing units) that help power AI models. This has been linked to industries ranging from cloud computing to finance and healthcare. With companies scrambling to integrate AI into their operations, Nvidia’s products are in high demand, and the company has positioned itself well to become a key provider of the graphics side of the infrastructure.
But with its stock now trading near record highs, and at a good price, the question is, is Nvidia stock rallying for a while, or is there still a lot of room left to run?
As noted by fellow Crazy writer Adria Cimino, Nvidia is sitting on 80% of the market for its products. It’s a great place to be.
Nvidia’s graphics cards are the backbone of many AI systems, and as the demand for AI technology increases, the demand for these graphics cards becomes even more useful. Digitaltrends.com has warned that there may be a shortage of GPUs, especially for gamers. This supply and demand imbalance creates a unique advantage for Nvidia. As long as the demand for AI and machine learning chips continues to grow and supply remains constrained, this stock should remain strong. This is clearly shown by how much faster Nvidia’s revenue is in fiscal 2024 compared to fiscal 2023. Companies need their GPUs.
The company’s latest stats are what you dream of in a growth stock. On a GAAP basis, Nvidia’s most recent quarter saw year-over-year revenue growth of 94% to $35.08 billion. Nvidia also had earnings growth of 111% year over year to $0.78 per diluted share, equivalent to $13 billion.
I often put a lot of emphasis on earnings, and rightfully so, as they are the backbone of long-term stock performance. In Nvidia’s case, I’m definitely still concerned about the potential revenue and the amount of revenue growth, as these two are intertwined over the long term. The chart below confirms that: Over the past five years, Nvidia’s stock price has increased in lockstep with its GAAP earnings per share.
