Nvidia reached the rarefied air of a $2 trillion evaluation on Friday, and its stock keeps on rising by leaps and bounds. It’s up 58.59% YTD, 1,873.44% in the last five years, and 16.4% on Thursday’s session alone.
There are a couple of good reasons for it: One of them is fundamental. Nvidia Corporation is at the forefront of the semiconductor industry, designing graphics processing units (GPUs) that power one emerging technology industry after another, from gaming to cryptocurrencies to professional visualization and data centers.
In addition, the company designs system-on-a-chip units for the mobile computing and automotive market. For instance, its GeForce product line is at the core of PC games; its Quadro line is at the core of professional graphics and high-performance computing systems.
Then, there’s the development of software technologies such as CUDA. It allows developers to deploy GPUs for general-purpose processing purposes. And there’s the company’s foray into AI and deep learning through its GPUs. They are broadly used in language processing, computer vision, and autonomous vehicles.
Nvidia’s lead in emerging technologies has helped the company’s top and bottom lines soar. In the most recent quarter, the Santa Clara-based company crushed analyst estimates, reporting revenue for the fourth quarter ending January 28, 2024, of $22.1 billion, up 22% from the previous quarter and 265% from a year ago.
Earnings per share came at $4.93, up 33% from the previous quarter and 765% from a year ago.
Jensen Huang, founder and CEO of NVIDIA, cheered this astonishing financial performance:
“Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries, and nations.”
Nvidia’s ability to execute its strategy of launching products for fast-growing, high-profit margin industries is also reflected in the economic value added (EVA) it creates for its capital holders. According to Gurufocus.com, Nvidia’s current EVA is 85.71%.
But there’s another factor behind the exponential rise of Nvidia’s stock on Wall Street: investor hype for the prospects AI holds to change the world.
The mixing of fundamentals makes it hard to determine how high Nvidia’s stock will reach on Wall Street.
“NVIDIA keeps knocking the cover off the ball,” Gregory Harmon, Professor at the Weatherhead School of Management at Case Western Reserve University, told International Business Times. “Far exceeding investor expectations. It now has a market cap more significant than Canada’s GDP. It may close today with a record increase in market cap, over 200 billion, passing the current one-day record gain of 197 billion from Meta platforms.”
Regarding how high the stock can go, Harmon referred to a trader who spent over $1.6 million on Thursday to purchase 2000 Sep call options with a strike at 1400. “That is a bet that the stock will nearly double by September.” He added.
Global X research analyst Tejas Dessai avoided providing a forecast for Nvidia’s shares. However, he made bullish comments on the company’s recent financial report.
“Nvidia crushed expectations, carrying its remarkable run into another quarter,” he told IBT. “The beat was again driven by explosive growth in the Data Center Segment, which supplies AI processors to large data center vendors, hyperscalers, and enterprise customers, growing revenues by 409% YoY.”
Dessai is confident that this investment cycle has long way to go before it is over. “Surprisingly, the Gaming segment remains resilient and growing, with revenues expanding nearly 56% YoY,” he added. “We think estimates will continue to be up for revision over the next couple of quarters as all product segments display accelerated momentum.”
Dessai believes Nvidia’s financial results testify to an unfolding mass disruption. “Trillions of dollars worth of chips will be up for replacement within data centers in the next few years to accommodate the rapid adoption of Generative AI,” he said. “This presents an exciting total addressable market for Nvidia, and given their pole position in premium AI chips, we see them continue to own the lion’s share of the space by 2030.”
