If you’ve been looking for stocks to invest in, you’ve probably heard about the incredible performance of Nvidia stock over the past 18 months. It really has been a remarkable run, with the chipmaker’s stock soaring 7x during this period. But some investors might be put off by the option of buying Nvidia shares after its stock split, thinking they are now overvalued. Is it a good idea to invest in Nvidia?
However, did you know that momentum can be a great predictor of future stock performance, especially if the company has a history of exceeding expectations? Actually, according to analysts, Nvidia is a good stock to buy for the second half of 2024.
Analysts remain optimistic about investing in Nvidia, not only because of the momentum, but also because the company is at the forefront of the AI revolution, which is just beginning. Exciting times for Nvidia shareholders appear to be ahead!
Nvidia’s dominance in AI
Nvidia is a company that plays a central role in the AI revolution. This is due to its graphics processing units having the exact capabilities needed for large language models. Although originally intended for the gaming sector, GPUs are also perfect for meeting the massive data processing requirements of AI.
Unlike central processing units, which handle tasks one after the other, GPUs are exceptional at parallel processing. This feature enables them to handle multiple tasks at the same time. Without this technology, the significant progress made in AI, such as advancements in facial recognition and self-driving cars, would not be feasible.
Nvidia’s GPU architecture is the primary reason for its dominance. In contrast to CPUs with a small number of cores, Nvidia packs a vast number of cores onto a single chip. This enables high processing power within a smaller space, making it essential for efficient AI processing.
The company has also prioritized high-bandwidth memory, allowing these cores to access data quickly and further speeding up AI computations. As a result, Nvidia has gained a significant advantage in the AI hardware competition.
Nevertheless, in the AI industry, hardware alone is not enough. Nvidia’s CUDA software provides direct access to the GPU’s virtual instructions. This software ecosystem allows developers to create and refine AI projects and has made Nvidia a one-stop-shop for all things AI.
Nvidia stocks after their split
During the first half of the year, the cost of investing in Nvidia rose to the point of being unaffordable. At around $1,200 per share, some investors found it difficult to include even one Nvidia share in their portfolio, which is why a stock split seemed like a good idea.
When asked about an upcoming stock split, Nvidia’s CEO Jensen Huang said: “One of the things I really like about stock splits, by the way, is that it makes for the stock purchase for our employees – and others – |easier|. It’s a good thing. And we want to make sure we do a good job for our employees, they do such an incredible job for us.”
After all, the idea of buying Nvidia stock with a share price near $1,000 was intimidating to retail traders, even with fractional trading available.
On June 7, 2024, Nvidia completed a 10-for-1 stock split, ending at a price of around $120 per share.
From there, Nvidia’s share price has fallen a bit, down about 8% from its high. The good news is that there is no problem that is causing a bigger drop. Experts consider it to be temporary.
Additionally, Huang said Nvidia is close to launching its new Blackwell graphics processing unit (GPU) platform, saying it will be the most successful product in the history of computing.
Although the CEO’s high expectations cannot be verified for now, Blackwell is likely to keep Nvidia at the top of the AI chip market. There’s no more reason to worry about the company’s valuation now than before its stock split, so considering investing in Nvidia may be a good idea.
AI growing industry
Nvidia has played a pivotal role in the development of artificial intelligence, but there are two crucial factors to consider for the future: Nvidia’s competitive advantage in the essential generative AI market and the fact that the AI revolution has just begun.
During the last 18 months, Nvidia has established a formidable position that it has successfully leveraged. Other companies such as Intel are eyeing Nvidia’s leadership, but it is uncertain how they will catch up.
Nvidia’s new H200 chipset is a must-have for generative AI and large language models. The H200 is believed to be 1.4 to 1.9 times faster than H100 when it comes to large language model inference. This is a remarkable increase in performance in just one year.
Furthermore, the market for AI is growing and has the potential to grow much faster. SoftBank’s Masayoshi Son is considering investing $100 billion in the AI chip space, and OpenAI’s Sam Altman is reportedly seeking $7 trillion for a series of AI chip factories that would meet the surging demand and reshape the semiconductor industry worldwide.
Considering the near-term growth in the industry, the persistent demand for GPUs that still outstrips supply, and the fact that we are just at the beginning of the AI revolution, analysts remain optimistic about buying Nvidia stock.
Should you buy Nvidia stock?
Analysts consider buying Nvidia stock a good idea due to its significant role in the AI revolution and attractive valuation metrics.
It is expected that the company will continue to deliver outstanding growth. Nvidia’s earnings are estimated to increase by 34.78% annually throughout the medium term.
With an average target price of $135,81, the stock is expected to have a 5.87% upside potential. The highest target price for Nvidia stock is $200, while the lowest is $90.
Information in this post is for general informational purposes only. It cannot and should not be considered as suggestions or recommendations regarding investing or financial decisions.
