Nvidia’s stock has seen a significant rise of approximately 750% since the beginning of 2023, similar to a surge it experienced from 2019 to late 2021. However, during the latter period, the stock also faced a drop of over 50%. The main driver behind Nvidia’s success is its GPUs, which have expanded beyond gaming into areas like AI. The recent surge in demand for GPUs for creating AI models is reminiscent of a previous wave driven by cryptocurrency miners. This previous wave ended when the cryptocurrency market crashed in 2021 and 2022, impacting Nvidia’s sales. However, Nvidia’s management is optimistic about a new wave of growth driven by AI.
While history may not repeat, Nvidia is facing a high valuation with its stock trading at 74 times trailing earnings and 47 times forward earnings. Analysts predict at least 59% earnings growth over the next year, leading to tough comparisons with previous performance. The uncertainty around the saturation of GPU demand and the longevity of the AI arms race pose challenges for Nvidia’s future revenue. Despite these concerns, the company’s lucrative business model and long-term potential in AI suggest that a significant drop in demand may not be imminent.
Investors considering Nvidia should weigh these factors and the company’s cyclical nature before investing. The Motley Fool’s Stock Advisor has identified top stocks for potential outsized returns, of which Nvidia is not currently included. The service has a successful track record of providing investment guidance and stock picks that surpass the S&P 500 returns since 2002. Ultimately, while the past performance of Nvidia’s stock raises questions about its future trajectory, the company’s position in the AI industry and evolving market dynamics make it an intriguing investment opportunity.
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https://finance.yahoo.com/news/nvidia-750-2-years-last-113000972.html
