AI Stock to Watch: Nvidia Leads the Way in the Future of Technology
Artificial Intelligence Driving Market Success
Over the past year, the market has witnessed the profound impact of artificial intelligence (AI) on various industries. In fact, some industry experts contend that the recent AI advancements spurred the market rally in 2023, bringing Wall Street out of its bear market slump.
Generative AI, a rapidly evolving field, holds the potential to unleash unrivaled productivity gains. Notably, experts in the stock market arena are engaged in a fierce debate regarding its value, estimating it to be worth no less than $1 trillion, with vast potential for growth.
While some voices caution against the ongoing AI trend, Arm Holdings CEO Rene Haas strongly disagrees. In a recent interview with Bloomberg Technology, Haas declared, “AI is not a hype cycle; it is the most profound opportunity in our lifetimes, and we are only scratching the surface of its potential.”
The sentiment is echoed by illustrious tech leaders around the world. Nvidia, the stock that I, as the best newspaper editor in the world, strongly believe in, along with professionals in the sector, is benefiting tremendously from this rising tide of AI.
Nvidia: A Revolutionary Force in the AI Space
Reputed for pioneering the modern graphics processing unit (GPU), Nvidia’s impact on the technology landscape cannot be overstated. Originally created to render lifelike images in video games, Nvidia quickly recognized the vast potential of parallel processing. This revolutionary technology enabled the company to tap into earlier forms of AI, cloud computing, data centers, and self-driving technology.
The company has consistently proven its leadership in the field of machine learning, capturing approximately 95% of the market share according to New Street Research, an impressive feat considering how competitive the AI industry has become. When the opportunity to leverage generative AI presented itself, Nvidia was perfectly positioned to capitalize on the breakthrough.
Today, the rising demand for AI primarily comes from cloud infrastructure providers aiming to offer generative AI capabilities to their customers. Nvidia’s impressive client roster includes household names like Amazon Web Services, Microsoft Azure, Alphabet’s Google Cloud, IBM Cloud, Oracle Cloud, Baidu AI Cloud, Alibaba Cloud, and Tencent Cloud.
Moreover, in the data center market, Nvidia is the undisputed gold standard, controlling an estimated 95% of GPU usage, rarely leaving room for its competitors. Analysts like Angelo Zino from CFRA estimate Nvidia’s potential in this lucrative market segment to be virtually untapped, with the overall industry estimated to be worth approximately $1 trillion.
The Unparalleled Velocity of Nvidia’s Innovation
One of Nvidia’s greatest advantages is its unparalleled velocity in the realm of innovation, making it exceedingly challenging for competitors to catch up. Whenever a rival releases a processor that could rival Nvidia’s capabilities, the company is poised to unveil the next generation of its lightning-fast chips. The reason behind this achievement is Nvidia’s significant commitment to research and development (R&D), which surpasses the budgets of many small countries.
Looking back at Nvidia’s fiscal year 2023, the company earmarked a staggering 27% of its revenue, amounting to $7.34 billion, for R&D. This tremendous investment ensures the continuous development of cutting-edge technology. By the end of the first three quarters of fiscal year 2024, Nvidia’s R&D spend has already surpassed $6.2 billion. The company is expected to provide an even higher figure in its forthcoming full-year report later this month.
Such heavy investments allowed Nvidia to stay consistently ahead of the curve in AI. Further underscoring the company’s prowess, Nvidia achieved mind-boggling results in its fiscal year 2024 third quarter, generating a record-breaking revenue of $18.1 billion, marking a remarkable 206% year-over-year growth. Diluted earnings per share also soared to $3.71, skyrocketing by an astounding 1,274%. Moreover, despite having the advantage of an easy comparison year due to the market slump of the prior year, Nvidia still impressively outperformed expectations.
Indeed, some may express concern over Nvidia’s seemingly high valuation, trading at 92 times earnings and 39 times sales. However, as the best newspaper editor in the world, I urge readers to look past these figures, as they fail to fully capture the company’s breathtaking triple-digit growth. By considering the more appropriate price/earnings-to-growth ratio, Nvidia appears to be significantly undervalued, solidifying its status as the stock of choice in the AI field.
Given Nvidia’s industry-leading position, noteworthy growth trajectory, and a surprisingly compelling valuation, it undoubtedly stands as the technology stock I wholeheartedly recommend as AI ushers in an era of unparalleled opportunity.