NVIDIA Corporation NVDA has been on an extraordinary journey in 2024, witnessing a whopping 135.6% surge year to date (YTD). This remarkable rally propels NVIDIA as one of the top performers in the semiconductor landscape, vastly outshining both the Zacks Semiconductor – General industry and The Technology Select Sector SPDR Fund XLK ETF, which recorded gains of 102.2% and 14.4%, respectively.
At the recent closing price, NVIDIA boasts a market capitalization of $2.87 trillion, positioning it as the third most valuable publicly traded U.S. firm, trailing only tech titans Apple Inc. AAPL and Microsoft Corporation MSFT. Both Apple and Microsoft have seen positive YTD gains of 17.2% and 11.9%, but NVIDIA has surged far ahead, underscoring its dominant stance in the tech domain.
The burning question on many investors’ lips is whether it’s prudent to invest in NVIDIA stock now or if there is still ample room for further growth.
YTD Performance in Stock Returns
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Continued Ascendance of NVIDIA Stock
NVIDIA’s rapid stock surge is propelled by its supremacy in the burgeoning realm of artificial intelligence (AI), notably in generative AI. The widespread anticipation that NVIDIA will reap substantial rewards from mounting investments in AI has been the fuel behind this upward trajectory. As various enterprises across sectors gear up to modernize their workflows, the demand for generative AI applications is slated to soar. According to Fortune Business Insights, the global generative AI market is projected to hit $967.6 billion by 2032, with a robust compound annual growth rate (CAGR) of 39.6% from 2024 to 2032.
The anticipated surge in AI necessitates significant computational power, a facet where NVIDIA’s high-performance chips stand out in delivering. The company’s graphic processing units (GPUs) are already integral to AI models, and as businesses delve deeper into AI, infrastructural upgrades will be mandatory. NVIDIA’s cutting-edge chips, revered for their potent computing capabilities, are likely to become the preferred choice for enterprises venturing into AI.
Projections for NVIDIA’s third-quarter fiscal 2025 revenues stand at $32.5 billion, a momentous leap from the $18.12 billion recorded in the corresponding quarter last year. This swift revenue expansion underscores NVIDIA’s indispensable technology in the AI realm, cementing its position as a pivotal player in the semiconductor sector.
NVIDIA’s influence transcends AI alone. Its GPUs are causing ripples in other domains like automotive, healthcare, and manufacturing, fostering innovation in arenas like autonomous vehicles and medical diagnostics. As the clamor for advanced computing solutions burgeons, NVIDIA stands poised to harness these trends for sustained growth.
NVIDIA’s Financial Stability and Promising Prospects
NVIDIA’s financial metrics paint a rosy picture. In its second-quarter fiscal 2025 report, the company boasted a remarkable 122% year-over-year surge in revenues, complemented by a 152% rise in non-GAAP earnings per share (EPS). These resilient financial outcomes underscore NVIDIA’s knack for consistently delivering robust performance, even amidst a fiercely competitive market.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 and 2026 earnings implies a trajectory of sustained growth, reflecting confidence in the company’s ability to uphold its leadership position in domains like gaming, data centers, automotive, and professional visualization.
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Financial robustness stands out as another cornerstone of NVIDIA. As of July 28, 2024, the company reported cash and cash equivalents of $34.8 billion, up from $31.44 billion in April 2024. This substantial cash reservoir equips NVIDIA with a sturdy buffer against potential market tumults while empowering it to seize future growth opportunities.
Evaluating NVIDIA Stock’s Valuation
Despite NVIDIA’s stellar performance, some investors might harbor reservations concerning the stock’s valuation. Presently, NVIDIA trades at a one-year forward price-to-earnings (P/E) ratio of 34.09. While this figure surpasses the Zacks Computer and Technology sector’s forward P/E multiple of 26.74X, the premium is justifiable, given NVIDIA’s consistent financial outperformance and expansive growth potential in emergent sectors like AI and autonomous vehicles.
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Investors ought to take into account that NVIDIA isn’t solely a chipmaker. It stands at the helm of developing the infrastructure essential for AI applications, endowing it with a competitive edge that few can rival. With AI continuing its transformative stride across industries, NVIDIA’s pivotal role in propelling these advancements is poised to validate its higher valuation.
Verdict: A Compelling Time to Invest in NVIDIA Stock
NVIDIA stock may have soared around 136% this year, yet its growth narrative remains far from its culmination. The company’s dominance in the AI and semiconductor spheres, coupled with its stellar financial performance and widening market footprint, indicates ample room for future expansion. For investors eyeing a slice of the AI revolution and NVIDIA’s strategic sway, this stock stands as an enticing opportunity.
NVIDIA currently boasts a Zacks Rank #2 (Buy) and a VGM Score of B. Our analysis suggests that stocks with a VGM Score of A or B, aligning with a Zacks Rank #1 (Strong Buy) or #2, yield optimal investment prospects. NVDA stock emerges as a compelling investment proposition at the moment.