{"id":14648,"date":"2023-05-27T12:34:50","date_gmt":"2023-05-27T16:34:50","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/nvidia-stock-can-still-rise-as-long-term-growth-gets-priced-in-nasdaqnvda\/"},"modified":"2023-05-27T12:34:51","modified_gmt":"2023-05-27T16:34:51","slug":"nvidia-stock-can-still-rise-as-long-term-growth-gets-priced-in-nasdaqnvda","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=14648","title":{"rendered":"Nvidia Stock Can Still Rise As Long-Term Growth Gets Priced In (NASDAQ:NVDA)"},"content":{"rendered":"
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Overview<\/h2>\n

NVIDIA\u2019s (NASDAQ:NVDA<\/span>) latest earnings report might have been the biggest event in the stock market this year. Smashing expectations as well as issuing significantly upgraded guidance, NVIDIA stock responded with a 27% uptick that added $202B to its market capitalization in one trading day.<\/span><\/p>\n

Now entering the weekend, NVIDIA continues to be the talk of the town amongst bulls and bears alike. Many investors are referring to it as an \u2018unprecedented\u2019 or \u2018once in a lifetime\u2019 earnings release, the likes of which have not been seen for companies that are already this large. I agree.<\/p>\n

This recent performance has been an acceleration of NVIDIA stock\u2019s already heady momentum so far this year. As of market close this week, NVIDIA has returned 6.9x the NASDAQ Composite as well as a staggering 16.89x the S&P 500 year-to-date.<\/p>\n

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These latest results have supercharged what had already been an active discourse around NVIDIA. Bulls continue to state that NVIDIA is the market leader in a significant secular growth market while bears continue to express reservations about its lofty valuation.<\/p>\n

The earnings results and the stock\u2019s price action this past week have added ballast to both sides\u2019 arguments without fundamentally changing the narrative for either.<\/p>\n

In this article, I\u2019ll put my chips down and posit my forward-looking view of the stock. I will do this by walking through the bear case in detail, extrapolating current NVIDIA metrics forward while also contextualizing it relative to comparable entities. Combining this with a review of its value proposition (business section) will allow me to determine if the stock is still worth buying at its current price.<\/p>\n

Business<\/h2>\n

Before looking at NVIDIA\u2019s stock I want to first comment on its business. While it is well-understood that NVIDIA is a market leader as well as a core beneficiary of the ongoing secular AI trend, it is sensible to evaluate its product and market positioning in more detail to see exactly why this is the case.<\/p>\n

At present, NVIDIA\u2019s sales are increasing rapidly due to it being the emerging market leader in providing custom chips that are particularly well-suited for artificial intelligence computing workloads. This is part of a longer-dated trend in what is NVIDIA\u2019s real core competency: accelerated computing.<\/p>\n

Accelerated computing is when a computing architecture makes use of another processor, distinct from the CPU, for certain tasks. In an accelerated computing architecture, the computer offloads certain types of tasks from the central processing unit onto this other processor. This coprocessor is specialized hardware that\u2019s optimized for parallel computing, which allows for increased efficiency in the computing system overall.<\/p>\n

This has been NVIDIA\u2019s focus since 2006. Having been focused purely on hardware optimized for graphics processing until that point, NVIDIA expanded its offering \u2013 and total addressable market \u2013 significantly by releasing CUDA that year. CUDA software allowed for general parallel processing on NVIDIA hardware, allowing customers to leverage graphics cards for other types of parallel computing for the first time. This established accelerated computing as a paradigm particularly fit for large-scale, massively parallel, computer workloads.<\/p>\n

It turns out that this kind of computing is what\u2019s required for building artificial intelligence systems. Accelerated computing architecture is distinctly efficient for artificial intelligence workloads as AI requires massive levels of parallel processing, just like computer graphics. This has been the standard architecture for AI or machine learning workloads occurring at any reasonably large scale for some time. Companies already involved in genuine AI research have needed to operate a significant data center footprint with this architecture in order to develop AI software. Companies just starting out in AI ultimately need to have it or have access to it.<\/p>\n

This all plays out in the enterprise GPU market. Companies need graphical processing units for their data centers in order to enable accelerated computing. The GPUs are the parallel-optimized processors that enable this computing paradigm. In this market, NVIDIA is undoubtedly king. As of Q4 2021, NVIDIA held 91.4% of the enterprise GPU market. The only other competitor of note was AMD, which held 8.5% of the market at that time. This is a dominant market position that indicates NVIDIA\u2019s superior product and looks set to be sustained.<\/p>\n

On a more speculative note, there is also another market worth mentioning: the personal computer GPU market. Just like enterprise data centers, GPUs and optimized coprocessors have also been increasingly present in consumer electronics. While video games may have kicked off and sustained this trend, artificial intelligence appears to have also become a factor: Apple has had dedicated AI coprocessors on iPhones since the iPhone 8, since Q3 2017. As artificial intelligence computing workloads become more commonplace, more of them may start occurring on end-user devices \u2013 which would likely increase demand in this market as well.<\/p>\n

Perhaps surprisingly, NVIDIA is not the leader in the PC GPU market; Intel (INTC) is.<\/p>\n

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Company<\/strong><\/p>\n<\/td>\n

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Q4 2022 PC GPU Market Share<\/strong><\/p>\n<\/td>\n<\/tr>\n

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Intel<\/strong><\/p>\n<\/td>\n

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71%<\/strong><\/p>\n<\/td>\n<\/tr>\n

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NVIDIA<\/strong><\/p>\n<\/td>\n

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17%<\/strong><\/p>\n<\/td>\n<\/tr>\n

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AMD<\/strong><\/p>\n<\/td>\n

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12%<\/strong><\/p>\n<\/td>\n<\/tr>\n<\/table>\n

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