1 Stock-Split AI Growth stocks with more upside than Apple or Tesla to buy now, according to Wall Street

Stock splits do not have a direct impact on the business, apart from lowering the share price, but can still be a useful indicator for investors. Stock splits are only necessary after substantial and sustained increases in share prices, which are themselves associated with strong financial results.

Many companies that have recently split their shares have also performed broadly S&P 500 (^GSPC -1.22%) In the past five years, including:

  • apple (AAPL -0.41%): 4-for-1 split in August 2020
  • Nvidia (NVDA -3.69%): 4-1 split in July 2021
  • Tesla (TSLA -0.60%): 3-for-1 split in August 2022

Wall Street sees Nvidia as a great buy. Apple’s average 12-month price target of $202 per share is 15% above its current price, and Tesla’s average 12-month price target of $275.10 per share is only 3% above its current price. But Nvidia’s average 12-month price target of $622.50 per share is 39% above the current price.

Here’s what investors should know about this artificial intelligence stock.

Nvidia is the gold standard in AI infrastructure

The Nvidia brand is synonymous with accelerated computing. The invention of the graphics processing unit (GPU) in 1999 initially brought sophisticated visuals to the PC gaming market, but subsequent chips have become integral to data center infrastructure as they provide the throughput needed for complex workloads such as artificial intelligence (AI). and graphics applications.

Nvidia systems are the gold standard in both cases. The company has more than 90% market share in supercomputer accelerators and workstation graphics. Machine learning processors also have a 95% market share, and its compute platform has consistently achieved top results on MLPerf benchmarks, standardized tests that compare the performance of AI products from different vendors.

In 2019, Nvidia expanded its data center footprint by branching into high-performance networking with the acquisition of Mellanox. Nvidia has since supercharged the acquired intellectual property with its own chips, and that part of its business has grown sevenfold in the past three years. Investors can expect this momentum to continue. Nvidia’s InfiniBand networking platform is built for AI.

More recently, Nvidia has taken additional steps to strengthen its AI leadership by branching out into subscription software and cloud services. For example, DGX Cloud allows businesses to provision the supercomputing infrastructure, software and framework needed to build AI applications, from recommendation systems in retail to autonomous robots in manufacturing.

Nvidia is also leaning into generative AI with NeMo and Picasso, cloud services that provide access to pretrained models that can be customized with company-specific data. NeMo supports language-based generative AI applications and Picasso supports image- and video-based generative AI applications. Both are available through DGX Cloud.

Nvidia is growing like wildfire amid huge demand for AI products

Nvidia reported unprecedented financial results in the second quarter. Revenue rose 101% to $13.5 billion on record data center sales, and non-GAAP earnings rose 429% to $2.70 per diluted share. CFO Colette Kress attributed the strong results to “tremendous demand for Nvidia accelerated computing and AI platforms,” ​​and CEO Jensen Huang singled out Generative AI.

Management expects those tailwinds to intensify in the near term. Third-quarter guidance calls for a sequential acceleration of revenue growth to 170% and an 18-percentage-point expansion in gross profit margin, indicating even faster revenue growth.

Yet Nvidia has largely ignored what management says is a $1 trillion opportunity in enterprise software, data center infrastructure, automotive computing and gaming graphics. Hence, the company is well positioned to maintain its momentum in the future.

Nvidia stock looks expensive

Nvidia is a wonderful business with a sustainable competitive advantage and strong growth prospects, but investors should consider the valuation carefully. The stock currently trades at 34.1 times sales, a premium to its three-year average of 22.9 times sales. That metric isn’t as unreasonable as its recent high of 45.8 times sales, but it’s still very expensive.

Wall Street could see a 39% gain over the next 12 months, but there’s no guarantee those returns will materialize. With that in mind, investors buying Nvidia stock today should be prepared for future volatility — and more importantly, they should start too small condition

Trevor Genevin holds positions in Nvidia and Tesla. The Motley Fool has positions in and recommends Apple, Nvidia and Tesla. Motley Fool has a disclosure policy.

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