Could Nvidia stock still be a bargain after its 1,241% rise?

At first glance, Nvidia (NASDAQ: NVDA) may not look cheap. Nvidia stock sells for 40 times earnings. The share price has soared 1,241% in five years largely on the back of surging demand for AI chips. But, for now, the jury is out on just how sustained the AI demand might turn out to be.

Still, with the sort of phenomenal value creation we have seen from Nvidia stock, the world’s largest company by market capitalisation certainly grabs my attention.

Even now, could there possibly be scope for future gains in the share price?

Lots to play for

I think there could be.

In fact, I think there could possibly still be scope for substantial further gains in the price of Nvidia stock.

Sometimes it can feel as if Nvidia is the new kid in class, riding on the coat tails of an explosion of investor interest in AI over recent years.

The reality is that the company’s recent success has been decades in the making.

Nvidia has long been an innovator. Its revenues and profits have surged over the past few years but that has built on a proven business model Nvidia has nurtured over decades.

It has deep client relationships, a large installed user base, and reams of proprietary technology.

If AI demand keeps growing, I think Nvidia’s sales, and earnings could keep growing at a fast clip. The most recent quarter saw sales revenues rise by a fifth year on year: clearly even at its huge scale, Nvidia has lots of momentum.