From Nasdaq: 2024-07-10 00:00:33

Nvidia (NASDAQ: NVDA) stock has surged over 150% this year due to high demand for GPUs for AI applications. Nvidia’s market cap is now $3.1 trillion, similar to tech giants Microsoft and Apple. Revenues are expected to double this year to $111 billion, with net margins at 57%. However, competition from AMD and Intel, as well as a potential easing of GPU demand, could impact Nvidia’s growth.

While Nvidia leads in AI chips, competitors like AMD are catching up. AMD’s recent chip outperforms Nvidia in some areas, with its Data Center sales rising 80% year-over-year. Big tech firms are also investing in AI chips, posing a threat to Nvidia’s dominance. The surge in AI infrastructure investments raises questions about potential returns, with Nvidia facing challenges in sustaining high growth and margins.

Investors question if Nvidia can maintain its momentum amid rising competition and potential changes in AI demand. With AI deployments shifting towards lower power requirements after the initial training phase, Nvidia’s current surge in GPU demand may not be sustainable long-term. The VC firm Sequoia estimates that AI infrastructure investments may not yield significant revenue returns, raising concerns about potential bubbles in the sector.

Nvidia stock has shown strong but inconsistent gains, with returns of 860% since early 2021. However, Nvidia underperformed the S&P 500 in 2022. In comparison, the Trefis High Quality Portfolio has consistently outperformed the S&P 500 each year since 2017. With uncertainties in the macroeconomic environment, including high oil prices and interest rates, Nvidia’s performance in the next year remains uncertain.

According to Trefis, Nvidia stock is valued at $89 per share, 30% below the current price. While Nvidia has seen impressive growth, potential challenges from competitors and changes in AI demand could impact its future performance. It’s important for investors to consider these factors when evaluating Nvidia’s stock for potential investment.



Read more at Nasdaq: Nvidia Stock: A Reality Check