Nvidia’s Stock is Hitting Insane New Highs. It May Still Be a Buy.
Investors are in a frenzy to own the biggest maker of the semiconductors that power AI. But there's some compelling logic behind the mania.
PUBLISHED: MAR 01, 2024 7:00 AM EST
Esquire Magazine
Nvidia, the Silicon Valley semiconductor maker that suddenly is the third most valuable company in the world, is the stock where logic seemingly doesn’t apply. Its dramatic ascent from niche chip player to master of the tech universe has been nothing short of dizzying.
To appreciate the magnitude of this Nvidia mania and just how off-the-charts expensive its stock has become, consider these facts: It took Nvidia more than two decades to achieve a market valuation of $1 trillion, hitting that milestone in June of last year. The second trillion? A mere eight months. Nvidia’s shares have rocketed so high, at a recent price of some $791, that investors are paying a whopping $32 for every dollar of revenue Nvidia recorded last year. For context, the only two companies worth more than Nvidia—Microsoft and Apple—trade for about 13 and 7 times revenues, respectively. The fevered anticipation in advance of the company’s earnings report on Feb. 21 spawned social-media memes joking that the fate of the world depended on Nvidia beating expectations. It did, and the stock spiked higher.
So, naturally, Nvidia is wildly overvalued, and its current stock price makes no sense, right? Not necessarily.
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