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Riding the AI Wave: Nvidia’s Stock Surge Signals Potential for Investors

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Riding the AI Wave: Nvidia’s Stock Surge Signals Potential for Investors
NVDA stock - Don’t Fight the Tide: Nvidia’s AI Momentum Is Your Ticket to Massive Gains

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Nvidia (NASDAQ:NVDA) is setting the stock market abuzz with its remarkable performance in 2024. Fuelled by strong quarterly results from Oracle (NYSE:ORCL), Nvidia experienced a 7.2% surge, nearing its all-time peak. This uptick was driven by the growing demand for AI-focused cloud services, hinting at potential collaborations between Oracle and Nvidia at the recent GPU Technology Conference.

The company’s unparalleled dominance in generative AI is evident through its near-monopoly in GPU supply for AI processing and machine learning. With a staggering 98% market share in data center GPUs and 95% in machine learning processors, Nvidia solidifies its position as the premier AI stock in the market.

Despite its premium valuation, Nvidia’s consecutive record-breaking quarters have investors pondering the wisdom of investing in this tech giant.

A Striking 75% Jump in 2024

Although NVDA stock faced a notable decline recently, shedding light on the volatility accompanying high-momentum stocks, its stellar performance year-to-date cannot be ignored. Surging by as much as 75%, with peaks hitting $974 per share, any dip may merely serve as a warning amidst the rapid growth.

Investors, especially those interested in AI, should closely monitor the stock’s trajectory, paying attention to support levels such as the daily 20 simple moving average at approximately $800 per share.

This recent setback likely signals a correction, unless significant breaches below previous support levels surface. Patience is key for investors, who should seize bullish momentum when it renews. Notably, Nvidia has already recovered most of its losses from the recent dip, pointing towards a positive trajectory in the following week.

Surpassing Apple?

Investor interest in Nvidia has propelled its valuation from $1 trillion to over $2 trillion in just nine months. Although trailing behind Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) in market capitalization, Nvidia’s current market cap of about $2.27 trillion stands approximately $400 billion below Apple and $800 billion shy of Microsoft.

While the thought of Nvidia claiming the top spot this year is tempting, the stock’s current pricing accounts for substantial growth already. However, Nvidia’s compelling relative valuation, particularly in contrast to its forward growth rate, suggests potential for further multiple expansion, potentially inching it closer to becoming the world’s most valuable company by year-end.

Nvidia: A Clever Choice

Nvidia dazzled Wall Street with consecutive record-breaking quarters in 2024. During Q4, revenue soared by a remarkable 265% to $22 billion, while operating income skyrocketed by 983% to almost $14 billion. The exceptional performance was primarily fueled by a 409% surge in data center revenue, buoyed by heightened chip sales.

Moreover, an improving PC market played a role in Nvidia’s success, with its gaming segment witnessing an 81% revenue spike in Q3 of 2024. As long as the company maintains this trajectory, surpassing analyst expectations with its outsized growth rate, further valuation expansion seems probable.

Similar to the “don’t fight the Fed” mantra embraced by many investors, resisting the tides with NVDA stock could lead to adverse consequences. With numerous positive catalysts in play, the bearish stance appears untenable for now.

On the date of publication, Chris MacDonald did not hold any positions in the securities mentioned in this article. The views expressed belong to the writer, governed by the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s passion for investing led him to pursue an MBA in Finance, taking on numerous management roles in corporate finance and venture capital over the past 15 years. His background as a financial analyst and fervent pursuit of undervalued growth opportunities shape his conservative, long-term investing perspective.