3 Things Smart Investors Know About Nvidia

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Nvidia (NVDA 1.37%) It has enjoyed one of its best years in its 30-year history, with the stock up 214% since January 1. As artificial intelligence (AI) booms, the company has built the hardware it needs to keep the industry moving forward. With countless tech companies rushing to join the high-growth field, Nvidia has become the go-to for anyone looking for AI chips.

While other chipmakers are scrambling to create hardware that can match Nvidia’s performance, the company is enjoying a massive advantage at the top. So it is a good idea to know more about this tech giant and potentially invest in its promising future.

Here are three things smart investors should know about Nvidia.

1. Why Nvidia has pulled ahead of all other chipmakers in AI

Prior to 2023, Nvidia was known for its dominant role in the PC gaming market. The company has more than 80% of the market share in discrete graphics processing units (GPUs), thanks to PC gamers around the world using the chips to power their home computers. As the complexity of games increases, PC users have become the first to adopt high-performance hardware. However, other markets have started turning to GPUs like Nvidia to take their technology to the next level.

Nvidia’s years of dominance in GPUs have positioned it perfectly to thrive in the expanding AI market. For example, the cloud market has for many years relied heavily on central processing units (CPUs), which boosted companies’ businesses. Advanced Micro Devices And Intel. However, as more cloud companies turn their services to AI, GPUs are quickly becoming the industry’s most important tool. And Nvidia offers some of the best in the business.

AMD and Intel each have a presence in GPUs, with 10% and 3% market shares, respectively. However, breaking Nvidia’s market command is challenging. The longer it takes for these companies to release products on par with Nvidia’s offerings, the harder it will be to unseat the chipmaker in AI.

2. Investing in one of the fastest growing AI markets in the world

Many companies have invested heavily in India this year Amazon And AMD is some of the technology leaders in the world sinking millions to develop this field. India is one of the fastest growing major economies and is poised to become a hub for all things technology, including chip manufacturing, cloud computing and AI.

So it’s no surprise that Nvidia is making its presence felt in the booming country by partnering with two of India’s biggest conglomerates: Reliance Industries Limited and the Tata Group. Nvidia CEO Jensen Huang announced the news on September 8, calling India “one of the largest AI markets in the world”. The companies plan to work together to build AI computing infrastructure and platforms for building AI solutions.

The project will be based on Nvidia’s GH200 Grace Hopper superchip and its DGX cloud, which makes it easier for businesses to train employees in AI technologies. Nvidia’s venture into India allows it to extend its international dominance in AI, using its design language to create a standard that will make it difficult for rival chipmakers to succeed.

3. An average 12-month price target that is too good to ignore

Nvidia shares have skyrocketed this year, with many analysts worried that it may be all hype that won’t last forever. However, stockholders were vindicated after the company released earnings for the second quarter of fiscal 2024 (ending July 2023). Data center revenue grew 171% due to increased demand for GPUs for AI applications, largely due to a 101% year-over-year increase in revenue in the quarter.

Nvidia’s sparkling quarter gave Wall Street evidence that AI might be as lucrative for the company as the recent bull run suggests. In fact, Nvidia expects more growth in its current quarter as supply pressures improve faster than expected.

Analysts are buoyed by the company’s promising earnings and growing dominance in AI. Nvidia’s average 12-month price target of $638 is about 40% higher than the current position. Meanwhile, 50 out of 53 analysts covering Nvidia currently rate its stock a buy/strong buy.

It’s still relatively early days in AI, which gives Nvidia huge growth potential. As a result, it is worth considering investing in this leading tech company.

John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of Amazon subsidiary, The Motley Fool. Danny Cook has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Advanced Micro Devices, Amazon.com and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel and long January 2025 $45 calls on Intel. Motley Fool has a disclosure policy.

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