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Why Nvidia Stock Isn’t in a Huge Bubble
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Try to remove this king from the throne.
In the days since Nvidia’s launch (NVDA) big quarter and perspectives on Wednesday night, two tracks emerged.
Track One is owned and operated by Wall Street and believes Nvidia will continue to reach new profit heights this year and next. Consensus estimates (which can be tracked on Yahoo Finance here) are up (again), and the Street remains steadfast in its appetite for lofty price targets.
The other lane is owned and operated by the media, and it increasingly seeks to poke holes in Nvidia’s investment thesis. Hey, I get it; It’s our job to be skeptical of numbers, common narratives, and leaders.
But to be out there selling that Nvidia stock is in a bubble because it’s booming, or that its finances might be in a bubble because of surprising growth rates, seems completely wrong to me.
Let me say this: I don’t have a car in this race – I don’t own Nvidia stock and never have.
All I’m saying is that an asset bubble has a few simple characteristics.
First: the appreciating asset generally does not have the fundamentals that justify this appreciation. Two: people are blindly buying the asset, without understanding it – mainly because everyone else is jumping in.
I don’t see any of those things for Nvidia.
Investors appear to be very knowledgeable about Nvidia’s business and are buying for the right reasons.
So, Nvidia’s growth rates justify a higher valuation. This is a company that grew profits by 461% in the first quarter! Sales exploded 262%!
Why? Because we are witnessing a seismic shift in technology stacks at the hands of generative AI, powered by models underpinned by Nvidia chips. No one is even close to this company’s technology. Concerns about Amazon (AMZN) and apple (AAPL) building your own AI chips is great to discuss, but Nvidia is doing it at scale and is 27 miles ahead of these companies.
Nvidia CEO Jensen Huang delivers the keynote address at Nvidia GTC in San Jose, California, March 18, 2024. (AP Photo/Eric Risberg) (ASSOCIATED PRESS)
“People want to deploy these data centers right now,” Nvidia CEO Jensen Huang told Yahoo Finance’s Julie Hyman and Dan Howley in a statement. exclusive interview right after the earnings (video above). “They want to put our [graphics processing units] work now and start earning money and saving money. And so that demand is very strong.”
Will Nvidia continue to grow its bottom line by triple digits? No, but growth rates will remain impressive and faster than competitors.
The story continues
Bubble? Let’s get real here, guys!
Amazon AWS has started making AI chips to better control a supply chain hungry for these powerful pieces of technology. AWS CEO Adam Selipsky discusses the strategy in a new episode of Opening bid podcast. Listen below.
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Brian Sozzi is the executive editor of Yahoo Finance. He is also the host of “Opening bid“podcast. Follow Sozzi on Twitter/X @BrianSozzi and so on LinkedIn. Tips on business, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to participate in Yahoo Finance Live? Email Brian Sozzi.
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