Nvidia (NVDA) is expensive, but it’s expensive for a reason.
Readers need to participate in this epic move going on in Nvidia’s stock.
Anything resembling a dip will be bought because the demand for Nvidia’s products vastly outweighs the supply.
There are signs that Nvidia could deliver better-than-expected results thanks to the importance of the company's artificial intelligence (AI) chips, which carry a massive price tag.
Investors have been buying up the stock by the truckload on the hype around AI applications and how they are going to create terrific demand for Nvidia's chips.
They should deliver us a great forecast moving forward as AI is the hottest trend in town.
At the same time, investors shouldn't forget that a third of Nvidia's revenue comes from PC-centric businesses -- gaming and professional visualization. With PC sales declining at an alarming pace and a recovery still some time away, there is a chance of Nvidia's results and guidance not being up to analysts' expectations.
Nvidia gets nearly 60% of its revenue from selling chips deployed in data centers. The sizable influence of the data center business on Nvidia's top line could help it overcome the PC market's weakness, especially considering that companies involved in the development of AI applications made a beeline for its chips.
Nvidia's H100 graphics processing unit (GPU), which is used for training large language models and powers generative AI applications such as chatbots, sells for as much as $40,000. This robust pricing power is the reason AI is expected to substantially boost Nvidia's growth in the coming years, potentially adding billions of dollars to the company's revenue.
The good part is that investors may witness the impact of AI-related demand on Nvidia's business very soon. DigiTimes reports that the semiconductor bellwether reportedly placed more orders for data center chips at foundry partner Taiwan Semiconductor Manufacturing.
A closer look at how AI-related spending is booming gives us more reasons to believe that demand for Nvidia's expensive AI chips could be high.
Meanwhile, the AI chip market alone is expected to grow to a whopping $227 billion a year by 2032 from just $17 billion last year, according to Precedence Research. Nvidia is the leading player in this market, with an estimated share of 95% of the market for GPUs used for machine learning applications. It’s almost guaranteed to see AI turning out to be a long-term catalyst for the stock.
The company's solid pricing power in AI chips and robust demand for those chips could help Nvidia deliver such impressive growth.
If there is some macro event that jolts the market, that would be a perfect entry point into Nvidia shares.
The violent upswings in Nvidia make it difficult to find entry points; therefore, cherish those down days because they are so seldom.
The strong momentum in AI manifests itself directly in this one chip stock Nvidia.
Don’t miss the roller coaster ride to profits.
