NVIDIA Corporation (NASDAQ: NVDA) is a software and fabless company that designs and sells GPUs. It also sells chip systems for robotics, vehicles, and industrial tools. The company also builds APIs for high-performance computing.
Stock Performance
NVIDIA (NVDA) stock is amongst the ”Magnificent Seven” stocks that have dominated the S&P 500 in 2023. The seven stocks have grown their valuation to over 27% of the index’s total valuation of nearly $36 trillion.
NVDA stock is up 244.55% TYD, among the year’s best-performing stocks. Its rise has placed it in an exclusive club of firms with a valuation of over $1 trillion. As of December 19, 2023, the stock is worth $491.75 during early trading.
The stock’s performance reflects investor confidence in the company’s strategic significance, especially in the AI chip race. It also reflects their confidence in the company’s ability to play a critical role in transformative sectors like data center solutions, gaming, and AI.
A Bet on AI
The main driver of NVDA stock price in 2023 has been the hope that it will be the primary beneficiary in the growing generative AI sector. Given the inherent opportunities created by generative AI, NVDA could retain its momentum in 2024 as products come to market.
Various industries’ growing adoption of OpenAI represents a unique opportunity for NVIDIA, a market leader in AI chips. Generative AI has already proven itself in various sectors, including education, healthcare, advertising, customer service, video games, marketing, and more.
According to a report by Grand View Research, the generative AI market is estimated to be worth $109.37 billion by 2030. The report projected a CAGR of 35.6% for the sector from 2023 to 2030.
Generative AI is resource-intensive, requiring powerful AI chips, some of which are still in the theoretical phase. Enterprises seeking to retain a competitive edge will buy AI chips as soon as they can find them.
NVIDIA is in a position to design and deliver these chips, which will further drive up its value. Its existing GPUs are already utilized in AI applications, with new use cases being created in various sectors.
In its fiscal Q324 earnings report, NVIDIA projected a revenue of $20 billion in fiscal Q424, up from the $6.05 billion it reported in fiscal Q423. In Q324, the company reported a revenue of $18.12 billion, a 206% Y/Y increase.
Stock Forecast
Analysts have given NVDA stock a strong buy rating based on its current performance. They project a high of $1,100 and a low of $195 for the stock. Their average price target of NVDA is $609.89, which is a 24.09% upside for the stock.
IS NVDA Stock A Bubble?
Nvidia has emerged as the leading player in designing AI chips and is at the helm of the AI revolution. Its current valuation is based on the assumption that it will continue being the dominant player in the sector, with little chance of displacement by a new player.
While it is unlikely that any new player could dislodge Nvidia from its dominant position, it is still possible in the fast-moving tech sector. Only time will tell if NVDA stock is a bubble. There is a high probability that it continues to be the dominant player in the AI revolution. Thus far, its strong buy rating by analysts is correct.
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