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Nvidia Stock’s (NVDA) Sky-High Valuation: What is Priced In?

Nvidia’s (NVDA) stock price has soared to unprecedented heights, fueled by the AI boom and the company’s dominant position in the GPU market. It’s market cap briefly touched $3.5 trillion on Friday. However, this meteoric rise has raised questions about its valuation. Is the future already priced into the stock, or are there still significant upside opportunities?

The AI Gold Rush

Nvidia’s GPUs have become the de facto standard for AI and machine learning applications. The company’s powerful chips are essential for training and running complex AI models, driving demand from both consumers and enterprise customers.

This surge in demand has translated into impressive financial performance for Nvidia. The company has consistently delivered strong revenue and earnings growth, fueled by the AI boom.

The Valuation Question

While Nvidia’s growth prospects are undeniably strong, its valuation has reached stratospheric levels. The stock’s price-to-earnings (P/E) ratio is significantly higher than the industry average and the broader market. That’s understandable for a fast-growing stock. Assuming that NVDA becomes a more mature stock in a few years and keeps growing at the same rate the entire stock market grows. A mature but growing company usually gets a price-earnings ratio of around 20. This means currently NVDA’s stock price implies that it will be generating after tax profits of $175 billion a year if it manages to retain its dominance in the chip industry.

Over the last 12 month period NVDA generated $96 billion in sales and $53 billion in net income. So, basically, investors basically assume that NVDA will be able to triple its revenue and profits until it becomes a more mature company.

If that happens, NVDA stock will return zero percent. The investors who are buying NVDA stock today are assuming that Nvidia will deliver even better results than tripling its revenue and profits. I personally own NVDA, but I am not convinced that the company can deliver these lofty expectations.

While Nvidia’s future looks promising, investors should exercise caution and consider the risks associated with its high valuation. It’s important to assess whether the current price reflects the company’s long-term growth potential or if there’s a bubble forming.

While I acknowledge the potential of NVDA as an investment, my conviction lies in the belief that some other AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: Long NVDA. This article was originally published at Insider Monkey.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!

The whispers are turning into roars.

Artificial intelligence isn’t science fiction anymore.

It’s the revolution reshaping every industry on the planet.

From driverless cars to medical breakthroughs, AI is on the cusp of a global explosion, and savvy investors stand to reap the rewards.

Here’s why this is the prime moment to jump on the AI bandwagon:

Exponential Growth on the Horizon: Forget linear growth – AI is poised for a hockey stick trajectory.

Imagine every sector, from healthcare to finance, infused with superhuman intelligence.

We’re talking disease prediction, hyper-personalized marketing, and automated logistics that streamline everything.

This isn’t a maybe – it’s an inevitability.

Early investors will be the ones positioned to ride the wave of this technological tsunami.

Ground Floor Opportunity: Remember the early days of the internet?

Those who saw the potential of tech giants back then are sitting pretty today.

AI is at a similar inflection point.

We’re not talking about established players – we’re talking about nimble startups with groundbreaking ideas and the potential to become the next Google or Amazon.

This is your chance to get in before the rockets take off!

Disruption is the New Name of the Game: Let’s face it, complacency breeds stagnation.

AI is the ultimate disruptor, and it’s shaking the foundations of traditional industries.

The companies that embrace AI will thrive, while the dinosaurs clinging to outdated methods will be left in the dust.

As an investor, you want to be on the side of the winners, and AI is the winning ticket.

The Talent Pool is Overflowing: The world’s brightest minds are flocking to AI.

From computer scientists to mathematicians, the next generation of innovators is pouring its energy into this field.

This influx of talent guarantees a constant stream of groundbreaking ideas and rapid advancements.

By investing in AI, you’re essentially backing the future.

The future is powered by artificial intelligence, and the time to invest is NOW.

Don’t be a spectator in this technological revolution.

Dive into the AI gold rush and watch your portfolio soar alongside the brightest minds of our generation.

This isn’t just about making money – it’s about being part of the future.

So, buckle up and get ready for the ride of your investment life!

Act Now and Unlock a Potential 10,000% Return: This AI Stock is a Diamond in the Rough (But Our Help is Key!)

The AI revolution is upon us, and savvy investors stand to make a fortune.

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A New Dawn is Coming to U.S. Stocks

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…

Should I put my money in Artificial Intelligence?

Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.

Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…

But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.

That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…

And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.

He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

Click to continue reading…