Considering how investors are flocking to buy stocks of anything AI is it a good time to buy Nvidia stock now that it is down from an all-time high by 10%. Generative AI is most talked about in stocks or otherwise. Everything spiraled after ChatGPT as ChatGPT did what AI assistants like Apple’s Siri, Amazon’s Alexa, and Alphabet’s Hey Google couldn’t do. It set the long overdue artificial intelligence trend in motion. People are flocking to get answers from ChatGPT for almost anything from cracking some of the toughest exams to stock recommendations. Even investors are pouncing on anything that says ‘generative AI’ because OpenAI doesn’t trade on the stock exchange.
Nvidia’s revenue outlook
Nvidia released its fiscal 2024 first quarter earnings on May 24, and the stock made a jump of 24% in one day, entering the $1 trillion market cap. The stock jumped from $305 to over $419, exceeding its crypto bubble peak of $329.85 in November 2021.
Nvidia stock’s 24% jump owing to the company’s bullish revenue outlook of $11 billion in the second quarter that was up 63% from $6.7 billion in Q2FY23. All this growth will be led by record demand for accelerated computing and generative AI. Nvidia’s CEO Jensen Huang, in the fiscal fourth-quarter earnings, said, “Our entire data center family of products, H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand, and BlueField-3 DPU is in production. We are significantly increasing our supply to meet surging demand for them.”
Nvidia has a history of meeting and beating its earnings guidance. It means the outlook is something to be bullish on.
Year to date, NVDA is up more than 150%. This is significantly higher than any other large or mega-cap stocks performance YTD is followed by META which is up 119%. DataTrek Research points out that without the gains in 2023 in Apple, Microsoft MSFT, Alphabet, and Nvidia, “the S&P 500 would be down 0.7 percent YTD without the snapback in US large cap Tech from deeply oversold conditions at the end of last year.”
This sudden jump in tech stocks remotely related to generative AI has sparked a debate on Wall Street about a new tech bubble.
Nvidia’s AI infrastructure
Nvidia is the company that created GPUs, and these GPUs gave data centers the computing power to perform AI tasks. It started with the PC gaming rally, then the crypto rally, and now it is riding the data center rally.
The AI data center is moving from retrieving data to generating data using AI. Generative AI is just one of the applications. Global data centers are upgrading from general purpose to accelerated computing as everyone is chasing the AI dream. Nvidia has a full stack of AI infrastructure with a supporting operating system ready to be sold. Nvidia, in its 2022 Investor Day presentation, estimated its AI ecosystem to have a $1 trillion addressable market, with data center and automotive each estimated to be a $300 billion market.
Should I buy NVidia stocks? OPINION
Many would want to buy considering that it is down by 10% from its peak. NVidia is having a bright future and for long term investment it sounds good, but currently it’s an expensive stock to buy with a price-to-earnings ratio (P/E) of 195. Looking at the current scenario, if one owns NVidia already and looking at holding it for the long term, it will yield returns but you could also book profits in some of your shares. If you are looking to enter to buy some Nvidia, one should wait and watch a correction is most likely possible.
