The Phenomenon Behind the Soaring Nvidia Stock
The stratospheric surge of Nvidia stock can be attributed to the AI-driven frenzy that has gripped the market, leading to a robust climb in absolute terms. With a remarkable 61% increase this year and a staggering 240% hike in 2023, Nvidia has levitated to unprecedented heights. Notably, its shares have ascended a remarkable 481% over the past three years, surpassing its 2021 levels post a four-for-one split.
The Financial Fortitude Behind Nvidia’s Triumph
Nvidia’s recent meteoric rise is underpinned by its premier position as an AI chip provider. While some observers may find the surge in Nvidia stock perplexing, it is bolstered by sound financials. With a projected revenue of $24 billion for fiscal Q1 2025 and an anticipated leap to over $100 billion this fiscal year and $130 billion in the next, Nvidia’s growth trajectory is nothing short of remarkable.
Over the past four years, the company’s revenue has sextupled, accompanied by an even more substantial surge in profits. In a market where many growth narratives have lost their luster, Nvidia offers a beacon of hope with strong double-digit revenue growth and a proven track record of execution.
The Resilience of Nvidia Stock Amidst Market Volatility
Despite the anticipation of a downturn by some, Nvidia stock continues its upward trajectory, reaching new peaks with unwavering consistency. Surprisingly, even after its substantial ascent from the lows of 2022, Nvidia’s valuation remains relatively modest compared to its peers. Trading at a next 12-month price-to-earnings multiple of 32.1x, only Meta Platforms and Apple boast a lower multiple among the elite “Magnificent 7” stocks.
Nvidia’s Pursuit of Corporate Apex: A Feasible Dream?
The audacious target price of $1,400 set by Rosenblatt Securities propels Nvidia on a trajectory to attain a market cap of $3.5 trillion, surpassing the current market cap of Microsoft, the incumbent top U.S. corporation. The once far-fetched notion of Nvidia claiming the title of the world’s largest company now looms as a distinct possibility.
A retrospective glance at the historical evolution of U.S. corporate juggernauts reveals a dynamic landscape where victors rise and fall in alignment with their financial prowess and shifting market sentiments. From Microsoft’s dominance at the turn of the millennium to Apple’s reign in recent years — with brief interludes — the corporate hierarchy is subject to constant flux.
While Elon Musk’s lofty aspirations for Tesla’s supremacy resonate with bravado, the mutable nature of stock market supremacy ensures that future shifts in power remain inevitable.
Contrarian Voices Amidst the Nvidia Euphoria
While Nvidia basks in its current glory following the fiscal Q4 earnings call, dissenting voices, including valuation maven Ashwath Damodaran, caution against excessive exuberance. Damodaran’s skepticism, not limited to Nvidia but encompassing the entire “Magnificent 7,” underscores concerns about overvaluation. Nevertheless, for proponents of growth investing, Nvidia’s trajectory signifies a compelling long-term narrative with the potential to redefine corporate zenith.
On the date of publication, Mohit Oberoi held positions in: AAPL, AMZN, META, MSFT, GOOG, NVDA, TSLA. All information and data in this article are solely for informational purposes. For additional details, please refer to the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
