Nvidia has seen remarkable performance and doubled its market cap to nearly $4.5 trillion this year due to the escalated level of its GPUs demand. Artificial intelligence depends on these chips and that need is only beginning.
Although the revenue development of Nvidia has been slightly lower lately, normally it is very high. The company has projected that it will have a revenue growth of 50% in its upcoming quarter which is quite impressive given that it is a firm of its magnitude.
The rebound of its China business is one factor that makes investors hopeful of the future earnings of Nvidia. Nvidia previously lost billions in sales this year after export restrictions prevented it from selling some of its chips in China.
The U.S. government is presently helping Nvidia to get approval to sell in China. This is likely to increase the sales to a great extent and see the growth rate of Nvidia move upwards once again.
Moreover, there are numerous large technological corporations that are actively spending more on data centers, which Nvidia GPUs are fairly popular in. The continuous demand is likely to enable Nvidia to achieve or surpass its revenue expectations in future.
The caveat in this is the valuation of Nvidia that is currently very high. The stock is overvalued relative to the rate of its growth at about 43 times the forward earnings whereas, in the past years it was doubling or tripling. Nonetheless, Nvidia appears prosperous in the market because of its role in AI innovation and sound business.
Moving on, should Nvidia resume its business activities in China and further capitalize on the chip shortages that feature AI-inspired GPU uptake, it may generate profitable quarters again and further propel its stock.
Nvidia is a strong company to monitor, and the price is high only when revenue growth and market expansion are considered. When making an investment decision concerning the Nvidia stock, investors ought to consider the growth prospects against the steep valuation.
