The past few years have witnessed an unprecedented expansion of artificial intelligence (AI) into various aspects of life. Cashing in on this expansion, companies involved in this space are most certainly at the forefront of the next big thing in AI applications.
Of all the key players, Nvidia (NASDAQ: NVDA) has clearly been the one to watch, gaining a jaw-dropping 2,300% increase over the past five years (at the time of this writing), cementing its position as one of the most remarkable growth stories in the technology space. Importantly, investors have been eager to capitalize on its success as the company rides the AI wave with chips for data centers and graphics.
The stock’s 199% one-year return is a testament to its continued relevance in the artificial intelligence space, fueled by the explosive demand for GPUs (graphics processing units) that help power AI models. These are now integral to industries ranging from cloud computing to finance and healthcare. With companies scrambling to integrate AI into their operations, Nvidia’s products are in high demand, and the company has positioned itself well to be the key supplier for the graphics side of infrastructure.
But with its stock now trading near all-time highs, and at a decent premium, the question is whether Nvidia stock’s rally is done for a while, or is there still plenty of room left to run?
As fellow Fool writer Adria Cimino pointed out, Nvidia is sitting on 80% market share for its products. That’s a pretty pleasant spot to be in.
Nvidia’s graphics cards are the backbone of many AI systems, and as demand for AI technology surges, the need for these graphics cards becomes even more useful. Digitaltrends.com has warned that there is likely to be a GPU shortage, especially for gamers. This supply and demand imbalance creates a unique opportunity for Nvidia. As long as the demand for AI and machine learning chips continues to grow and supply remains constrained, this stock should remain strong. This is heavily demonstrated by how quickly Nvidia’s revenues took off in fiscal 2024 compared to fiscal 2023. Companies need their GPUs.
The company’s most recent stats are what you dream of in a growth stock. On a GAAP basis, Nvidia’s most recent quarter saw year-over-year revenue growth of 94% to $35.08 billion. Nvidia also had earnings growth of 111% year over year to $0.78 per diluted share, equal to roughly $19.3 billion.
I often put a big emphasis on earnings, and rightfully so, as they are the backbone of long-term stock performance. In the instance of Nvidia, I certainly still care about the earnings potential and overall revenue growth potential, as the two coincide over the long term. The below chart confirms that: Over the last five years, Nvidia’s stock price actually grew almost lock step with its GAAP earnings per share.
