The artificial intelligence (AI) boom is well underway, and perhaps no company has benefited from it more than Nvidia (NASDAQ: NVDA)For years, the company’s semiconductors have been the go-to choice among tech companies for AI processing, and now that move is paying off for Nvidia stock.
The company’s stock price has more than doubled over the past year, prompting many investors to ask: Where does Nvidia go from here? Here are some thoughts on the company’s position as a leader in AI and what that might mean for the year ahead.
Maintaining AI Dominance
To understand where Nvidia might be a year from now, we need to know where it is now — sitting atop the AI hill. Nvidia holds an estimated 70% to 95% of the AI chip market, and it’s constantly innovating to maintain its leadership position.
The company recently released H200 AI Processora follow-up to its popular H100. CEO Jensen Hwang says demand already outstrips supply.
How does this AI dominance translate into real benefits for Nvidia? The company’s data center revenue — which includes sales of AI chips — has soared 427% Since the first quarter of last year (which ended on April 28), it reached $22.6 billion.
What about Nvidia’s competitors? They already have some worthy competitors. Advanced Micro Devices AMD is its main competitor and should not be ignored. But even AMD’s AI growth is dwarfed by Nvidia’s.
AMD’s data center sales in the second quarter (ended June 29) rose 115% to just $2.8 billion. While that’s impressive, it’s only a fraction of Nvidia’s data center revenue and far less than its sales growth.
More investment in artificial intelligence
Some of the world’s biggest tech companies have been making headlines recently as they report their quarterly results. Investors have been interested in their revenue and profits, but their multi-billion dollar spending on artificial intelligence has been getting a lot of attention.
Here’s how two tech CEOs recently defended the spending spree:
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“I actually think all companies that invest are making a rational decision, because the downside of being left behind is that you’re going to be out of position on the most important technology for the next 10 to 15 years.” Meta Amazon CEO Mark Zuckerberg said in a recent podcast:
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“When we go through a curve like this, the risk of underinvesting is significantly greater than the risk of overinvesting for us here.” alphabet The company’s CEO, Sundar Pichai, said in his company’s latest earnings call:
according to Goldman SachsOther tech companies are spending huge amounts of money to compete in AI as well, and their combined spending will total 1 trillion dollars Over the next few years.
There’s no guarantee that Nvidia will benefit from these investments or that companies will continue to invest as heavily as they have over the past year. But tech companies are currently facing a battle in AI. Nvidia’s AI chips are the best, and spending is on the rise. That puts the company in a great position for the year ahead.
Potential buying opportunity
Let me state the obvious first: Nvidia is expensive. The company’s stock has value. price to earnings ratio (P/E) 40.9. That’s not cheap by any measure, but it’s less expensive than its stock was at the same time last year when its P/E ratio was around 63.
The recent stock market downturn — driven by a number of factors, including concerns about U.S. job growth — has sent Nvidia’s stock price down about 20% over the past month. This latest drop could be an opportunity for investors who are bullish on AI.
Nvidia stock won’t see the massive gains it has seen over the past year. However, given its leadership position in AI, coupled with the fact that major tech companies are ramping up spending on AI infrastructure, Nvidia has the potential to outperform the market over the next year or more.
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Susan Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former head of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Chris Snow The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Goldman Sachs Group, Meta Platforms, and Nvidia. The Motley Fool has no position in any of the stocks mentioned. Disclosure Policy.
Where will Nvidia stock be in one year? Originally posted by The Motley Fool