Even Amidst Recent Publicity, Industry Experts Maintain a Buying Position on AI-Focused Stocks like Nvidia. Let Me Explain Why.
Nvidia (NVDA) has been among the top performing stocks over the past few years, propelling it to become the world's most valuable company. However, it stumbled a bit over the past month or two, temporarily falling to second and third place behind Apple and Microsoft.
But don't lose faith in Nvidia just yet. It bounced back to the No. 2 spot with a market cap of $3.41 trillion. Many financial analysts predict that the company's best days are still ahead, particularly as it continues to supply chips for artificial intelligence (AI). Let's delve into what they had to say about Nvidia's latest quarterly results.
Why analysts are enthusiastic about Nvidia's results
The stock has experienced a dip recently, but it's essential to view this as mere background noise. A closer look at Nvidia's most recent quarterly results, announced on Dec. 6, reveals an optimistic picture for the company.
An analyst from Wedbush, Dan Ives, described the earnings report as "impeccable," suggesting it should be preserved and displayed in the Louvre. He went on to laud CEO Jensen Huang as the "Godfather of AI" and gave high praise to Nvidia's latest chip, the Blackwell AI, calling it the "LeBron James of semiconductors."
Ives also expressed confidence that Nvidia would reach a $4 trillion market cap and beyond, offering optimism for the broader tech sector ahead of 2025.
Following the earnings report, analysts from three other firms - J.P. Morgan, D.A. Davidson, and Bernstein - raised their price targets for the stock.
Davidson's Gil Luria stated, "Given comments from hyperscalers regarding additional investments in AI compute and Nvidia's ability to deliver even with production setbacks, we believe it can foster growth into the next year."
And William Stein of Truist noted, "Nvidia remains the AI company due to its culture of innovation, its well-established incumbency, and its significant investment in software, pre-trained models, and services."
Despite Nvidia's recent dip in the stock market, financial analysts remain optimistic about its long-term prospects. Should you consider buying during this downturn? We'll discuss that next.
How to cleverly invest in Nvidia at present
There's a distinction to be made between a company performing well and a stock that's doing well. Nvidia is poised for significant growth in the years and decades to come.
However, the stock price currently reflects a significant portion of this potential. Despite a valuation surpassing $3 trillion, shares are priced at an astonishing 30 times sales. For context, Microsoft is valued at just 13 times sales, while Apple is priced at a relatively modest 10 times sales.
Of course, Nvidia's growth rates, both present and projected, remain far ahead of these two tech giants. Additionally, demand for AI infrastructure is still in its infancy, suggesting that it's far from reaching its full potential. But with that strong valuation, volatility often follows. Small shifts in industry or company growth prospects can have a substantial impact on the valuation multiple and stock price.
If you're optimistic about AI's future, this could present an opportunity to start building a position in Nvidia. Just keep in mind that you may have opportunities in the near term to boost your investment at a lower stock price.
And don't forget to consider diversifying your position. Nvidia currently holds a dominant position in AI semiconductors, but as history has shown, the top dog doesn't always retain its position forever.
Nvidia shares are currently a better deal than they were a few weeks ago, but be mindful of diversifying your position with fresh funds on hand to make additional purchases if short-term volatility strikes again.
Given the analysts' high opinions on Nvidia's latest earnings report, they believe the company's best days are still ahead, with many suggesting significant potential for growth in the finance sector, specifically in investing in artificial intelligence. For instance, Davidson's Gil Luria stated, "Given comments from hyperscalers regarding additional investments in AI compute and Nvidia's ability to deliver even with production setbacks, we believe it can foster growth into the next year."
Furthermore, the stock's recent dip in the market has not deterred financial analysts from viewing Nvidia as a lucrative investment opportunity. With the belief in Nvidia's long-term prospects, some analysts recommend considering buying during this downturn, taking advantage of the lower stock price. As stated by Wedbush's Dan Ives, "Ives also expressed confidence that Nvidia would reach a $4 trillion market cap and beyond."
These comments highlight the optimism around Nvidia's potential for growth in the finance sector, specifically through investing in artificial intelligence, and the potential opportunity for investors during this current market dip.
