/NVIDIA%20Corp%20logo%20outside%20building-by%20BING-JHEN_HONG%20via%20iStock.jpg)
As we approach the 2024 U.S. election, Nvidia (NVDA) stock has been on an increasingly volatile ride, leaving investors to wonder each day whether they're in for an exciting adventure or a nerve-wracking drop. Last week, Nvidia was among the high-profile semiconductor stocks to turn lower, with the artificial intelligence (AI) chip leader responding to headlines from both President Biden and GOP nominee Donald Trump that ramped up the hawkish talk around advanced semiconductor tech and China trade. That followed closely on the heels of a rocky end to June for NVDA, with many investors taking profits after the stock's 10-for-1 split.
While Vice President Harris seems the likeliest nominee following Biden's weekend withdrawal from the presidential race, the DNC convention is about a month away. That said, the VP isn't necessarily expected to deviate from the current administration's stance on semiconductors, including advanced tech trade with China and semiconductor manufacturing at domestic companies, like Intel (INTC).
Despite the recent volatility, Nvidia's financial performance has been stellar. The company reported record revenue, with its data center segment showing an incredible 427% surge. This growth is driven by the relentless demand for AI technologies, putting Nvidia at the forefront of the AI revolution. And reports today suggest that the AI chip giant is working to design a compliant AI chip for the Chinese market, with shipments expected as soon as Q2 of 2025.
So, is Nvidia stock a high-risk play ahead of the U.S. election, or do the recent dips present a golden buying opportunity for savvy investors? Let's examine the numbers, growth engines, and analysts' latest insights.
Nvidia’s Financial Performance
Nvidia (NVDA), the tech giant behind top-tier GPUs and AI technologies, is known for its dominance in gaming and data centers. Nvidia's business model revolves around selling specialized chips that power everything from gaming consoles to autonomous vehicles.
Nvidia's stock performance has been nothing short of spectacular. The stock is up 178% over the last 52 weeks, and NVDA has surged 149% in 2024 alone. However, the shares have retreated about 16% from their June 1 all-time highs, presenting a potential buying opportunity.
For Q1 of fiscal year 2025, Nvidia posted record-breaking revenue of $26.0 billion, up 262% year-over-year, primarily driven by their data center segment, which recorded a staggering 427% increase. GAAP earnings per diluted share hit $0.59, up 21% from the previous quarter and 629% from a year ago. Non-GAAP earnings per diluted share were $0.61, up 19% from the previous quarter and up 461% from a year ago. This growth was fueled by the high demand for AI chips, which have become essential for tech giants like Alphabet (GOOGL), Microsoft (MSFT), and Meta (META).
Of course, with a market cap of $2.9 trillion, Nvidia is something of a tech giant itself. And Nvidia's valuation metrics reflect both its stellar performance and the optimistic consensus expectations for the company. With a forward P/E ratio of 43.10, NVDA is valued at an (arguably deserved) premium to the tech sector median. That said, the P/E to growth (PEG) ratio of 1.29 looks quite reasonable, and suggests NVDA might still be reasonably valued, given its expected growth trajectory.
Analysts are split on Nvidia's valuation. Some argue the stock is overvalued due to its high P/E ratio and the challenge of maintaining such rapid growth over time. However, Nvidia's ongoing innovation and strategic investments in AI and data center technologies, bolstered by its asset-light business model, suggest the company is well-positioned for long-term upside.
Nvidia also offers a modest dividend yield of 0.02%, and the company may have room to reward shareholders with buybacks or special dividends if its financial performance continues to outpace expectations.
Beyond the Chips: Nvidia's Growth Engines and Headwinds
Nvidia has made big moves in AI and cloud computing, with some analysts arguing that it's undervalued for its software prowess. One standout development is its partnership with Hewlett Packard Enterprise (HPE) to launch the NVIDIA AI Computing by HPE portfolio. This collaboration aims to speed up the adoption of generative AI in businesses by combining Nvidia’s AI computing power with HPE’s cloud infrastructure. The highlight, HPE Private Cloud AI, offers a fast, energy-efficient, and flexible solution for developing AI applications, potentially boosting Nvidia's market reach and revenue.
In June, Nvidia also introduced the Omniverse Cloud Sensor RTX, a set of microservices designed to simulate sensors accurately. This AI-powered innovation is crucial for developing autonomous machines, enabling safer and more cost-effective testing environments. This kind of AI tech positions Nvidia at the forefront of the growing autonomous technology sector.
Furthermore, Nvidia's AI Enterprise-IGX platform, combined with Holoscan, aims to streamline AI deployment in medical, industrial, and scientific fields. This enterprise-grade solution enhances real-time AI computing at the edge, offering robust performance and security, which could attract a broad range of industrial clients.
While these advancements highlight Nvidia's growth engines, the company does face challenges - most notably from geopolitical tensions and potential U.S. tech export restrictions to China, given its key relationship with Taiwan Semiconductor (TSM). Stricter policies could potentially limit Nvidia's market expansion and impact its stock performance, making it a somewhat higher-risk play ahead of the U.S. election, as trade with China will no doubt remain a key talking point.
However, the company's efforts to adapt to tighter trade conditions, coupled with longer-term growth initiatives, should provide a longer-term floor - which means that Nvidia still looks like a strong buy on pullbacks.
What Do Analysts Say About Nvidia Stock?
Wall Street analysts are bullish on NVDA, with Loop Capital raising its price target to $175 today, and Piper Sandler hiking its own target to $140. The average analyst price target for NVDA was $139.41 heading into Monday's trading, about 13% higher than current levels.
Out of 39 analysts covering Nvidia, 33 rate it as a “strong buy,” two as a “moderate buy,” and four suggest a “hold.”
Finally, it's worth pointing out that record levels of insider selling on NVDA stock - including by CEO Jensen Huang - isn't necessarily cause for concern, or some indication that he's lost confidence in his own company. Executives at growth-fueled tech companies are often compensated in stock, and their stock sales are generally scheduled ahead of time, and are often set to be triggered based on price and/or volume - specifically to avoid the implication of nefarious intentions on the part of company insiders.
Rolling the Dice or Calculated Risk?
When you look at the big picture, Nvidia's stock feels more like a smart bet than a risky dice roll. Sure, there may be some bumps in the road caused by broader market swings and geopolitical issues, but the company's strong growth, remarkable AI innovations, and generally reasonable valuation make it a solid buy when the price dips. With a bright future ahead and plenty of room to grow, Nvidia seems ready to handle whatever the U.S. election throws its way and keep climbing.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
