Nvidia has seen a significant increase in its stock value, making it the most valuable company in the world with a valuation of $3.3 trillion. The company’s success can be attributed to the growing demand for AI-driven graphics processing units and its recent stock split. Nvidia’s accelerated computing chips are ahead of competitors like AMD and Alphabet in terms of performance, leading to a substantial increase in sales and profits over the last quarter. The company’s outlook remains strong, with revenue expected to reach $28 billion in the next quarter.
Despite strong gains over the past few years, NVDA stock has had periods of inconsistent performance. While it outperformed the S&P 500 in 2021 and 2023, it underperformed in 2022. The Trefis High Quality Portfolio has consistently outperformed the S&P 500, indicating better returns with less risk. The current market price of Nvidia stock may be overvalued, with the market assuming the company will dominate the AI chip market. However, increasing competition from companies like AMD and Google could challenge Nvidia’s position.
Concerns about easing GPU demand, revenue concentration, and regulation by governments pose risks to Nvidia’s future growth. The surge in demand for GPUs could slow down as AI model training phases reach completion, leading to reduced demand growth. Additionally, the company’s revenue is concentrated among a few major customers, who are also working on their own AI chips. Government regulations, such as export restrictions on advanced chips to China, could impact Nvidia’s business operations.
Although Nvidia is expected to double its sales this year, any slowdown in growth could pose a risk for investors, especially in the current high-interest rate environment. Trefis values Nvidia stock at $89 per share, which is below the current market price. Investors should consider the factors driving Nvidia’s valuation and revenue streams before making investment decisions. Trefis Market Beating Portfolios offer insights into investment strategies that have outperformed the market.
