Nvidia (NASDAQ:NVDA) has been on an absolute tear to start 2024. The company’s stock surged on Tuesday, extending its winning streak and propelling NVDA stock back toward its all-time high. The stock rose 7.2% amid a mixed market. Strong quarterly results from Oracle (NYSE:ORCL) fueled Nvidia’s climb, with demand for AI-focused cloud services driving growth. Oracle hinted at upcoming collaborations with Nvidia at its GPU Technology Conference.
The company’s dominance in the generative AI realm is unmistakable. With a near-monopoly in GPU supply for AI processing and machine learning, Nvidia has solidified its position as the leading AI stock in the market.
Boasting 98% market share in data center GPUs and 95% in machine learning processors, Nvidia outpaces its rivals. This dominance reflects in its consecutive record-breaking quarters, prompting investors to ponder whether Nvidia stock remains a wise investment despite its premium valuation.
An Incredible 75% Surge in 2024
NVDA stock saw a significant downturn on Friday, prompting concern among investors amidst its recent surge. This setback underscores the inherent volatility and risks linked to high-momentum stocks, particularly amid the recent AI-driven market rally.
Peaking at $974 per share, NVDA stock surged as high as 75% on a year-to-date basis (and we’re still in Q1!), meaning this recent 11% decline may only turn out to be a cautionary tale in navigating the stock’s rapid growth higher.
Investors, particularly those vested in AI, must vigilantly track the stock’s performance, eyeing support levels such as the daily 20 simple moving average near $800 per share.
The recent downturn is likely a correction, pending any substantial breaks below previous support levels. Investors should stay patient and capitalize on bullish momentum when it resumes. Notably, Nvidia has made up most of Friday’s losses, and continues to move in the right direction as we continue on in a fresh week.
Overtaking Apple?
Investors are flocking to Nvidia, driving its valuation from $1 trillion to over $2 trillion in nine months. Nvidia now trails only Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) in terms of market capitalization. Nvidia’s current market cap of around $2.27 trillion is around $400 billion away from Apple and around $800 billion behind Microsoft. But given Nvidia’s recent performance, many expect this stock could have the growth power to take top spot some time this year.
I don’t know I’d go that far just yet. There’s a lot of growth that’s already been priced into NVDA stock here.
However, it’s clear that Nvidia’s relative valuation (especially compared to its forward growth rate) is compelling. Currently, NVDA stock is priced at much higher multiples than Apple and Nvidia, though on a price-earnings-to-growth (PEG) basis, the stock looks much more attractive. Until this dynamic changes, it’s likely we could see continued multiple expansion in the stock, and it’s entirely possible we could be talking about Nvidia as the world’s most valuable company by year’s end.
Nvidia Is Still a No-Brainer
Nvidia astounded Wall Street with consecutive record-breaking quarters in the past year. In Q4 of 2024, revenue surged by 265% to $22 billion, with operating income skyrocketing 983% to nearly $14 billion. The remarkable growth stemmed mainly from a 409% uptick in data center revenue, driven by increased chip sales.
Additionally, an improving PC market contributed to Nvidia’s success, with its gaming segment witnessing an 81% revenue surge in Q3 of 2024. So long as these sorts of numbers continue to be pumped out, and analyst expectations are squashed by the company’s outsized growth rate, I think more valuation expansion is entirely possible.
Just like the “don’t fight the Fed” mandate many investors have taken to heart, I think fighting against the tides with NVDA stock can be equally disastrous. There’s just too many positive catalysts for this company for bears to even think about taking a shot at the other side of this trade, at least for now.
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.
