NVIDIA has seen a tremendous rise in its stock value due to the AI gold rush, but some believe it may be overvalued, drawing comparisons to the dot-com bubble. Morningstar strategist Brian Colello suggests a fair value of $105 per share after a stock split, but the current price sits at $136, indicating overvaluation.
From a fundamental standpoint, NVIDIA’s stock appears to be in bubble territory, with high P/E and PEG ratios compared to industry averages. However, the potential of generative AI to reshape the global economy could justify the high valuation. Estimates suggest AI could unlock trillions of dollars in economic value, far surpassing NVIDIA’s current market capitalization.
Despite competition from companies like Advanced Micro Devices and Intel, NVIDIA’s GPUs and CUDA platform remain ahead in the AI space, making it difficult for developers to switch platforms. While there may be niche opportunities for competitors, NVIDIA’s market share among major developers is likely to remain strong.
In conclusion, while NVIDIA stock may seem expensive by traditional metrics, its position in the AI revolution suggests that its growth potential is just beginning. The transformative nature of AI technology should not be underestimated, and fears of another dot-com bubble may be unfounded.
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https://www.fool.com/investing/2024/06/20/is-nvidia-stock-still-a-buy-after-its-10-for-1-sto/