Nvidia’s Blackwell GPUs are all the hype currently. The US chipmaker is poised to bring in billions of dollars this year, with companies having pre-ordered its newest line of GPUs for the next 12 months. There is no denying that this year will be dominated by Nvidia’s new GPUs, but we still don’t know whether for good or bad reasons.
Nvidia continues to struggle with its execution of Blackwell GPUs. This isn’t an issue with the company’s production line or the performance of its chips. The company has received complaints from users related to overheating, which would suggest the infrastructure to support the new GPUs is still not perfect.
This isn’t necessarily Nvidia’s fault. The company chooses its partners carefully and keeps them in the loop regarding the products it may need to buy months down the road. But not all companies are innovating as fast as Nvidia and that’s where the problem lies. Nvidia would ideally want to ramp up the delivery of its Blackwell GPUs by the middle of 2025. It is still on track to do that, but the execution issues, something shareholders don’t normally associate with Nvidia, are keeping the share price in check.
Estimates suggest Nvidia will bring in as much as $200 billion through the sale of these GPUs this year. This is a big number and also one that helps make sense of the valuation. We previously covered how Nvidia was cheaper than Broadcom on a forward price-to-sale ratio basis. We believe this is the valuation investors need to keep in mind. Markets are forward-looking and anyone who values the stock based on past numbers will find Nvidia expensive.
The recent correction in the stock can partly be associated with the uncertainty surrounding the ramp-up. People are waiting for clarity on whether the company is on track to deliver GPUs in vast numbers. Once that clarity comes, the stock will start factoring in all the expected revenue. This clarity would also help investors start envisioning what the future holds for Nvidia, which is even more exciting considering the advancements in autonomy and robotics. The future is interesting, and Nvidia finds itself at the center of all the developments. We believe it is a great stock to own and any correction in the stock price is a buying opportunity.
Nvidia is 5th on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 193 hedge fund portfolios held NVDA at the end of the third quarter which was 179 in the previous quarter. While we acknowledge the potential of NVDA as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
