Dividend Stocks

Is NVDA Stock Destined to Be the Next Trillion-Dollar Company?

Nvidia (NASDAQ:NVDA) stock impressed with its recent earnings report. It surged  approximately 25% stock following its earnings release.

Given Nvidia’s size, any sort of increase of this magnitude has to be tied to a complete shift in how investors an analysts think about such a stock.

This appears to be the case, with investors clearly viewing the company’s AI-driven growth as likely to be long-lived. This past earnings report, which we’ll get to in a minute, was mind-blowing.

Indeed, a 25% move in a penny stock is one that may be expected. However, for a company that’s now worth nearly $1 trillion, these kinds of moves aren’t supposed to happen.

Now, the question is whether this momentum can continue from here. Let’s dive into whether NVDA stock has more lead left in its pencil heading into the second half of this year.

NVDA Nvidia  $402.88

Nvidia First Quarter Fiscal 2024 Report

Nvidia’s first quarter earnings report provided a lot for investors to be excited about.

On the company’s top line, revenue of $7.19 billion was down 13% year-over-year, but marked a dramatic 19% increase over the past quarter. However, it was Nvidia’s outlook that had investors excited.

The company noted it now expects $11 billion in the second quarterly, largely as a result of increased interest around GPU capacity for AI-related companies. That’s way ahead of what analysts were expecting.

Jensen Huang, the CEO of Nvidia, noted that the computer industry is undergoing two transformations: accelerated computing and generative AI.

As companies strive to integrate generative AI into their products, services, and business processes, there is a growing shift towards accelerated computing, with a trillion dollars’ worth of global data center infrastructure being repurposed for this purpose.

“We have successfully ramped up production for our entire data center product lineup, including H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand, and BlueField-3 DPU,” Huang said. “To meet the skyrocketing demand, we are scaling up our supply significantly.”

If this supply materializes, Nvidia could be the picks-and-shovels play in the AI space all investors will want to jump on.

What’s Happening

Nvidia stock has simply skyrocketed this year. The company’s stock price has surged more than 170% year-to-date, driving a significant portion of the gains for most indices.

Now, expectations are that this is likely the next company to join the trillion-dollar market-cap club, which would necessitate a rally of only less than 4% from current levels.

Nvidia’s stock has been on a strong upward trajectory, surpassing key resistance levels on the way higher. With a fresh all-time high being hit, it’s unclear how high this stock can fly.

However, from a technical basis, that so many support levels have been blown away may be concerning. If something results in an overall downturn in the market, NVDA stock could be among the biggest decliners.

Long-Term Outlook

As the world shifts toward accelerated computing and generative AI, Nvidia is well-positioned to capitalize on the opportunities.

Its increased presence in the AI sector has resulted in a strong stock rally and it might reach its all-time highs or join the trillion-dollar market cap club soon. However, traders must remain patient and keep risk management in mind. 

Nvidia’s first quarter fiscal 2024 report also proved to be encouraging. Revenue increased 19% from the previous quarter despite a 13% decrease compared to the same period last year.

I’m cautiously optimistic that this momentum can continue, but at some point, this stock’s valuation will likely need to align with what investors are willing to pay for exposure to AI.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.