NVIDIA has been garnering increased attention on Wall Street, with its share price reaching new highs, driven by the demand for AI. But is the optimism being overplayed
Nvidia has been making waves in the news with its latest financial report, which showcased a remarkable quarterly revenue of $22.1 billion. This figure marks a 22 per cent increase from the previous quarter and a robust 265 per cent surge compared to the same period last year. The shares of the chip company has surpassed tech giants like Amazon and Alphabet (the parent company of Google).
Nvidia's market capitalization now exceeds that of the SENSEX 30 index. Investors have also witnessed strong returns, with Nvidia's shares delivering more than 230 per cent increase on an annual basis
Quite evidently the surge in innovation and the growing demand for Gen AI have played a big role in these surging figures. Last year, the chip-making company had also surpassed Intel in terms of revenue generation. Skepticism has found little space in the growing uptrend, thanks to Goldman Sachs for calling NVIDIA the 'Most Important Stock On Earth.'
As AI continues to play a pivotal role in the tech space, everybody wants to get their hands on the newest innovation taking place.
Brian Colello, Equity Strategist, Morningstar said in a report, "The business (NVIDIA) has transformed remarkably in just a few quarters.” It’s extremely uncommon “for an already-large established business to grow 300 per cent per year, 500 per cent per year in certain parts.”
Commenting on the future stock performance, Colello stated that the soaring demand for cloud computing services and the intense AI race, wherein no company wants to be left behind will act as favorable factors for the stock's performance. While overvaluation remains a concern, analyst suggests that NVIDIA's increasing dominance in the tech space will lead to it being fairly valued over time.
However, Morningstar's equity analyst has also given the stock a 'very High Uncertainty Rating.' This uncertainty comes from the rapidly evolving competitive space in AI, which Colello believes, changes almost weekly. He cautions investors against dismissing threats from rival chipmakers and cloud firms, as well as the potential for a slowdown in AI investment.