2023 marked the unofficial start of the artificial intelligence (AI) boom, and was also a turning point for Nvidia (NVDA +3.75%). Since then, the stock is up over 1,100%, but I don’t think Nvidia is close to being done. The reality is, there is still a ton more AI spending to come, and many projections point toward 2030 as a year when AI spending may slow down.
That leaves a ton of time for Nvidia’s stock to continue rising. Nvidia could still have major upside, especially after considering how cheap the stock looks and its expected growth.
Image source: The Motley Fool.
Demand for GPUs has proven insatiable
Nvidia makes graphics processing units (GPUs) and the products that support their usage. GPUs were originally designed for processing gaming graphics, a notoriously difficult workload. Eventually, GPUs were deployed in other scenarios like engineering simulations, drug discovery, and cryptocurrency mining — basically anything that required extreme computing usage. Their largest use case yet is AI, and we’ve yet to see peak demand.
Today’s Change
(3.75%) $7.11
Current Price
$196.41
Key Data Points
Market Cap
$4.8T
Day’s Range
$190.77 – $196.44
52wk Range
$95.04 – $212.19
Volume
5M
Avg Vol
179M
Gross Margin
71.07%
Dividend Yield
0.02%
Nvidia believes that global data center capital expenditures could rise to $3 trillion to $4 trillion by 2030. That’s huge growth in a short time frame, and Nvidia will be one of the primary companies capitalizing on this growing market.
During its past quarter, Nvidia delivered jaw-dropping 73% growth. But it’s just getting started. Wall Street projects that Nvidia’s revenue will grow 79% in Q1 and 85% in Q2. It’s hard to imagine the world’s largest company’s growth accelerating to that level after several years of strong growth, but that’s the reality we find ourselves in.
Despite these strong growth projections, Nvidia’s stock doesn’t trade for a premium valuation.
NVDA PE Ratio (Forward) data by YCharts
At first glance, 38 times trailing earnings seems expensive, and it is. However, when this year’s growth is factored in, that metric becomes 22 times forward earnings. This basically indicates that the market is only willing to price in one year of growth at a time, despite investors being told by multiple companies that this trend will last for several more years.
That long-term outlook is the individual investors’ secret weapon, as we can afford to take a longer-term view on the stock market. If Nvidia can continue putting up strong results after 2026, then today’s stock price is an absolute bargain. I think all signs point that way, which is why Nvidia stock is one of my largest holdings.