Investors witnessed Nvidia’s stock soar continuously for about 18 months starting from January 2023. The company, epitomizing the booming artificial intelligence (AI) sector, attracted a horde of investors eager for a piece of the action.
However, all stocks eventually face corrections, highlighting the significance of valuation. The recent correction saw Nvidia shares dip up to 13% below the closing record in June. Embracing quality stocks during corrections or bear markets often leads to exceptional returns.
Spotting Opportunities When Others Panic
This recent decline in Nvidia’s stock isn’t the first time investors shook its value by cashing in. In the latter part of 2022, Nvidia experienced a substantial drop in sales, triggering a sell-off and a price plunge of over 50% during that year.
However, missing that downturn meant missing out on exceptional gains since the beginning of 2023. Nvidia’s adaptability played a crucial role in this resurgence, especially with the surge in data-center sales and the rebound in gaming sales.
While recent sales hurdles, such as restrictions tied to supplying advanced chips to China, posed challenges, Nvidia appears prepared to launch a new chip complying with current trade rules, potentially driving revenue and stock prices higher.
Embracing Opportunity with Nvidia
Looking ahead, Nvidia’s China sales recovery and the momentum in domestic data-center sales promise a bright future. Particularly, the upcoming Blackwell platform for the data center market is anticipated to be a prime revenue driver with its new chip introductions aimed at enhancing income rather than replacing existing streams.
Positive signs from Taiwan Semiconductor regarding robust demand for AI chips signify a promising trajectory for Nvidia’s sales growth.
Nvidia AI training servers. Image source: Nvidia.
Nvidia’s strategy of supplying chips for AI model training and launching new, high-performance offerings like the upcoming Blackwell GPUs and AI server systems bolster its competitive edge. The company’s consistent innovation attracts major customers seeking to upgrade with the latest products.
Smaller companies striving to acquire Nvidia’s existing H100 GPUs underscore the robust demand, even as the launch of Blackwell approaches later this year.
Looking Ahead
Nvidia is slated to update investors with its next quarterly financial report on Aug. 28. A stellar report, outpacing expectations, would likely elevate the stock further.
Yet, as Nvidia’s exceptional results heighten investor expectations, reflected in a high forward P/E ratio, any misstep in growth projections could trigger another correction.
Considering Investment in Nvidia
Contemplate the investment in Nvidia keeping in mind:
The Motley Fool Stock Advisor team recently highlighted the 10 best stocks for potential massive returns. While Nvidia wasn’t on the list, the selected stocks are projected to yield significant profits.
Reflect on Nvidia’s trajectory since April 15, 2005; a $1,000 investment then would have grown to $751,180, underscoring the potential for massive returns.
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Howard Smith holds positions in Nvidia. The Motley Fool supports and recommends Nvidia and Taiwan Semiconductor Manufacturing. For disclosure details, check the disclosure policy.