nvidia (NVDA -1.19% ) Shares have started to fly once again, with shares of the graphics card specialist gaining 32% since March 14. The shares are now trading at 72 times ending earnings, which is higher than the multiple it was trading at in mid-March. Does this mean that investors who didn’t take advantage of Nvidia’s stock pullback missed out on buying this fast-growing tech company? Let’s find out.
Nvidia is expensive, but the valuation is still attractive
There is no doubt that Nvidia is still an expensive stock to buy. However, investors looking for a growth stock should note that the graphics card specialist was trading at a whopping 90 times earnings last year. Going back to 2020, Nvidia was still expensive with a P/E ratio of 85. It was only in 2019 that Nvidia’s valuation was relatively cheap at 60 times earnings.
Since the beginning of 2020, Nvidia stock is up 400%. The stock handsomely rewarded investors who had bought at 60x earnings in 2019. So growth-oriented investors still have a chance to buy the stock before it gets even more expensive due to multiple future catalysts coming into play. they should help the company maintain its outstanding growth. rhythm.
The latest technology trends should ensure rapid long-term growth
At Nvidia’s recent developer conference, the company revealed new products that support its aggressive pursuit of fast-growing markets such as artificial intelligence (AI)-enabled data centers, autonomous vehicles, and digital twin applications.
Nvidia unveiled the Grace Central Processing Unit (CPU) Superchip, which will target the high-performance computing (HPC) market and AI data centers. Nvidia says this chip combines two interconnected server CPUs and is capable of “providing the highest performance and twice the memory bandwidth and power efficiency compared to today’s leading server chips.”
The chipmaker also said that major players in the HPC, supercomputing, cloud and hyperscale markets are already working with Nvidia to integrate Grace Superchip into their applications. The product should be available in the first half of 2023. This move will be huge for Nvidia as it will mark its entry into a market where the company is currently absent.
By 2023, the server CPU market is expected to generate $19 billion in revenue. The space is currently dominated by Nvidia’s rivals. Intel and amd. According to Mercury Research, Intel controlled nearly 90% of the server CPU market at the end of 2021, with AMD holding the remaining market share. Nvidia’s foray into this space will unlock a huge opportunity for the chipmaker that has the potential to substantially increase its revenue.
At the same developer conference, the chipmaker announced that its automotive portfolio had grown to $11 billion, up from $8 billion a year ago. This pipeline could soon translate into real revenue: The company’s self-driving platforms are now in production and BYD, the world’s second-largest electric vehicle maker, announced that it will build its next-generation fleet on Nvidia’s DRIVE Hyperion architecture. .
BYD is just one of many companies leveraging Nvidia’s self-driving system to power its self-driving vehicles. With these partnerships, it wouldn’t be surprising to see the chipmaker’s auto business gain solid traction going forward. By expanding this business segment, Nvidia could generate substantial revenue: Last fiscal year, the automotive industry brought in $566 million for the company, which is just 2% of total revenue.
Nvidia OVX was another key product revealed at the conference that could power the company’s long-term growth. Nvidia has described OVX as “specifically designed to run complex digital twin simulations” of buildings, factories, warehouses, autonomous vehicles, or entire environments.
Digital twins will be the building blocks of metaverse, as the technology creates virtual copies of physical objects and spaces such as offices, schools, universities, stadiums and other places. Since the metaverse aims to connect people within 3D virtual spaces, the digital twin market will expand at an incredible rate in the future. A third-party estimate projects that the current $10.27 billion digital twin market could grow at an annual rate of 35% through 2027.
Still a good buy
Nvidia’s revenue soared 61% in fiscal 2022 to $26.9 billion. Adjusted earnings increased 78% to $4.44 per share. Until now, the video game and data center markets have been the pillars of this great growth, and are likely to help the company maintain its long-term momentum. And now that the company is ready to tap into more lucrative markets, its revenues and profits could grow substantially over the long term.
Investment bank cow ( COW -2.83% ) estimates that Nvidia could generate $140 billion in revenue and $28 per share in earnings by 2028. That would be a huge jump from last year’s numbers and indicates that Nvidia could remain a top player. growth stocks for a long time to come.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We are motley! Questioning an investment thesis, even one of your own, helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.