Nvidia Corp. (NVDA) has been making waves in the stock market as investors continue to show confidence in the chipmaker’s AI capabilities. Despite the stock’s upward trend, one fund manager believes that it is attractively valued and holds significant growth potential.
On Tuesday, Nvidia reached a new high during the kickoff of the 2024 Consumer Electronics Show, closing at $531.40. This rally contributed to the stock’s impressive gain of 264% since 2023, outperforming the Nasdaq 100 Index and the iShares Semiconductor ETF (SOXX), which remained nearly flat.
According to Gary Black, managing partner and co-founder of Future Fund, investors are recognizing Nvidia’s continued affordability. Currently trading at 26.5 times the consensus adjusted earnings per share estimate for 2024, the company is expected to achieve a compounded annual growth rate of 28% in earnings per share between 2024 and 2028.
Black highlighted several reasons for Nvidia’s outperformance, including its best-in-class products, excellent execution, robust management team, drama-free environment, and low headline risk. These factors have contributed to investor confidence in the company’s ability to deliver strong growth in the coming years.
Analysts also see further upside for Nvidia’s stock, with an average 12-month price target of $662.39, indicating approximately 25% potential upside from the current levels, according to TipRanks.
Despite the positive outlook, Nvidia faces challenges, such as the U.S. ban on exporting certain high-performance chips to China, a crucial market for the company. However, Nvidia’s guidance for the fourth quarter predicts revenue of $20 billion, plus or minus 2%, which would represent year-over-year revenue growth of over 230%.
One area where Nvidia has found success is with its AI accelerator chipsets, which have experienced strong demand due to the popularity of generative AI software and applications. The company’s focus on AI technology positions it well for future growth as the adoption of AI continues to expand across industries.
In conclusion, Nvidia’s stock has been on a remarkable upward trajectory, reflecting investor confidence in the company’s AI capabilities. Despite its impressive gains, the stock is considered attractively valued by some fund managers, who believe it holds significant growth potential. With best-in-class products, a strong management team, and a positive outlook, Nvidia is well-positioned to continue its success in the AI industry.
