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Nvidia (NVDA 7.16%) It rose again on Tuesday, extending its winning streak this year. The stock price rose as the trading day progressed, and by market close, the stock was up 7.2%.
While the overall market was clearly mixed for direction today, it was strong quarterly results in the US that helped lift chipmakers higher. oracle (ORCL 11.75%). The company noted that demand far exceeds supply and there is strong demand for AI-centric cloud services. Oracle also referenced its recent cloud infrastructure agreement with Nvidia, saying at its GPU Technology Conference (GTC) starting Monday, “We look forward to some very exciting joint announcements with Nvidia next week.” He hinted at further contracts in the future.
Is Nvidia stock still a buy?
This announcement adds to a growing body of evidence that the demand for generative AI is still in its infancy. Nvidia has taken pole position by supplying graphics processing units (GPUs) equipped to handle the rigors of AI processing. Moreover, rivals are unable to come up with better solutions, allowing Nvidia to dominate the field with his two methods.
First, Nvidia is the leading provider of GPUs used in data centers, controlling 98% of the market. wells fargo Analyst. This benefits his Nvidia, as the majority of AI computing takes place in the cloud and data centers. Second, the company is also the go-to company for processors used in machine learning (an nascent field of AI), and also controls his 95% share of that market. This has given Nvidia a strong position and a clear advantage over potential challengers.
As a result, NVIDIA has achieved three consecutive quarters of record growth, with significant triple-digit sales and profit growth year-over-year, with additional triple-digit quarters on the way.
This leads to the classic investment question: Is Nvidia stock a buy? After the company’s recent big earnings, Nvidia’s valuation has fallen significantly, and it currently trades at a forward P/E of 36x. This is expensive compared to the price-to-earnings ratio (P/E) of 28 times. S&P500Nvidia’s track record of blockbuster growth shows the company deserves a premium.
With Nvidia sitting at the toll booth, it’s clear that the demand for AI is here to stay. This in turn will benefit the company and its investors.
Danny Vena holds a position at Nvidia. The Motley Fool has positions in and recommends Nvidia and Oracle. The Motley Fool has a disclosure policy.
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