NVIDIA is a juggernaut.
This week, the company proved again that the artificial intelligence (AI) trend is far from over. It’s not just a “flavor of the day” idea. It is a profitable trend with a solid long-term outlook.
In just a year, NVIDIA’s investors saw its share price soar from $162.60 to $471.60. (It even briefly touched $500 per share in the intraday trading.) That’s a 190% gain.
At the same time, the S&P 500, a broad market index, gained only 14%.
This gain helped the company achieve a trillion-dollar-plus valuation—an impressive milestone.
NVIDIA’s Growth and Profits Impress Markets
NVIDIA surprised the market with its financial results for the third fiscal quarter. It boosted revenues by 101% over the last year, reaching $13.5 billion in sales. It delivered a solid beat over investors’ expectations of $11.2 billion.
The bottom line also came strong. NVIDIA booked $6.2 billion in net income, with an 843% gain over the past year. This number also came in above consensus estimates.
It’s no surprise the market got excited, sending the company’s share price higher. Well deserved.
NVIDIA is making the right product at the right time. Its graphics processing units (GPUs) became the core of the AI megatrend. These chips are the cornerstone of OpenAI’s ChatGPT technology and its peers.
The AI Trend Has Just Begun
Jensen Huang, NVIDIA’s CEO, noted that about one trillion dollars will be spent over four years as companies upgrade their data centers to make them AI-capable. Most of these are shifting from regular cloud services for storage to high-end computing technologies.
The list of the businesses spending on these upgrades includes the largest tech companies in the sector, such as Alphabet (Google), Amazon, Meta (Facebook), and others. These tech giants have no lack of resources. They can easily fund the rapid expansion of their computing power.
This is where the AI megatrend still has the potential to grow. As a supplier of “picks and shovels” to serve this megatrend, NVIDIA is a pioneer in the sector. However, it won’t be the only one. Other chip makers will also benefit from the adoption of AI.
Then, we would expect the providers of AI-enabled services to be next in line for gains. After all, global automation will improve productivity. This, in turn, is expected to secure future economic growth.
This “tech revolution” has received strong support from the world’s leading nations.
- The U.S. CHIPS Act directs $280 billion to support high-tech research and development.
- Europe allocated $47 billion toward the same goal to keep up with the U.S.
It’s why we see AI as a megatrend with strong return potential. However, we would focus on the companies working in the advanced economies. Geopolitical risks are lower in these geographies.
NVIDIA is a great example, but it’s not the only one working with the AI megatrend. Here at the Financial Star, we’re following sectors and stocks with high return potential in the long term.
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Thank you for your loyal readership,
The Financial Star team