With the promising prospects of artificial intelligence, Nvidia's stock price has risen nearly 7-fold from its low point in October 2022, reaching a peak of $806 from $108.
Since the beginning of this year, the market value of this chip giant has continuously surpassed Amazon and Google, once surpassing the $2 trillion mark, becoming the third largest listed company in the United States after Microsoft and Apple. Behind the high popularity, whether Nvidia's leading advantage will be threatened in competition has become a focus of debate among institutions and investors.
The release of dividends in the artificial intelligence industry
Against the backdrop of the Federal Reserve slowing down the pace of interest rate cuts, Nvidia's financial report has almost become the last hope of confidence in the US stock market. Goldman Sachs even calls it the most important stock in the world. Jim Cramer, a well-known stock analyst in the United States, also highly praised Nvidia CEO Huang Renxun, praising him for his foresight compared to Tesla CEO Musk.
Nvidia's latest performance did not disappoint, and Wall Street analysts quickly raised their target prices. According to the most optimistic estimate, Nvidia's valuation will reach $2.5 trillion in the short term. Institutions are also actively participating. According to a survey by Bank of America's global fund managers, the technology track represented by artificial intelligence is still crowded, and market enthusiasm remains high.
OANDA Senior Market Analyst Craig Erlam said in an interview with First Financial reporters that Nvidia has once again demonstrated absolute dominance in the industry. The accelerated computing and generative AI mentioned by Huang Renxun have reached the tipping point and have also brought a boost to the market. He expects that the significant promotion of productivity by the development of artificial intelligence will bring greater space for the release of performance by related industry enterprises.
James Demmert, Chief Investment Officer of Main Street Research, an investment research firm, stated that Nvidia's profit growth rate even exceeded the growth rate of its stock price:; Quota; Every time Nvidia releases its financial report, its P/E ratio shrinks because earnings per share are often much better than people's expectations& Amp; Quota;
Citigroup research has found that even if large cap stocks rebound more than 10% after profit announcements, there is still room for upward growth in the future& Amp; Quota; Large cap stocks that perform strongly in profitability tend to continue to perform well in the next three months& Amp; Quota; NVIDIA surged 16% the day after its performance announcement, with a market value increase of $277 billion, setting the largest daily market value increase in US stock market history.
Alex Saunders, a quantitative strategist at Citigroup, and a team of strategists studied the data of constituent stocks of the S&P 500 index over the past 30 years and found that in the early 21st century during the Internet foam, some companies' eye-catching financial reports could support the stock price to rise by 27% in the next three months& Amp; Quota; We still believe that this is the right strategy, because in the early stages of a new technology, shovel sellers benefited more than gold miners. Although this situation will eventually change, we are still in the early stages of promoting artificial intelligence& Amp; Quota;
Gross profit margin exceeding 76%
UBS became one of the few companies on Wall Street to lower Nvidia's target price after financial reports, from $850 to $800. UBS pointed out that based on factors such as the quarterly decline in Nvidia's total supply and the increase in operating costs, its revenue may slow down to a stable state in the coming quarters.
Due to a lack of substantial competition, Nvidia's market share in data center graphics processing units (GPUs) has grown to over 98%. This early leading advantage gave it huge pricing power, with its data center revenue soaring more than 400% year-on-year, reaching $18.4 billion, far exceeding market expectations of $17.06 billion. The gross profit margin for the first quarter of this year will exceed 76%.
As competitors begin to enter, Nvidia's performance growth ability may face a test.
AMD CEO Lisa Su previously stated that AMD's MI300 GPU revenue target is $4 billion. The threat also comes from Nvidia's important customers. Currently, cloud service giants such as Microsoft Azure, Amazon Cloud Services AWS, and Google Cloud have all launched their own AI chips, seeking to reduce their dependence on Nvidia GPUs. Oracle and Meta are also developing artificial intelligence chips internally.
According to Daniel Newman, CEO of Future Group, a technology consulting and research company, Nvidia is currently one of the world's leading companies; Quota; The most advanced and comprehensive deployment; Quota; The production of chip manufacturers is crucial for the world.
Newman believes that Nvidia still has a lot of room for growth in the future, but with competition emerging, it may not reach the sky high price that investors hope for in the future& Amp; Quota; It is important to note the law of large numbers& Amp; Quota; He said.
For Nvidia, another potential major risk may come from the excessive frenzy in the derivatives market. Institutional statistics have found that popular technology stocks show clear signs of gamma squeezes, which is a self reinforcing behavior. Investors buy out call options, which leads market makers to hedge against the underlying stocks by purchasing them, thereby pushing up the stocks. Once& Quota; Gamma Squeeze; Quota; The process of depletion will lead to a significant drop in stock prices.
Goldman Sachs recently released a report stating that after six consecutive weeks of buying, hedge funds sold technology stocks at the fastest pace since May last week as Nvidia's performance was realized. The trading department of the company stated that the US stock market experienced its largest net selling in five weeks last week, mainly influenced by macro products and individual stocks. The flow of funds indicates that investors are withdrawing from technology, healthcare, and industrial stocks.