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Proprietary Data Insights Financial Pros’ Top Meme Value Stock Searches in the Last Month
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Should You Hold Nvidia (NVDA)? |
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All week, markets waited for Nvidia’s (NVDA) earnings. So, when the tech giant reported results last night, EVERYONE paid attention. The company blew everyone’s mind with revenues up 262% YoY, with data centers, the AI powerhouse, up an insane 427% YoY for the quarter. According to our TrackStar data, interest amongst retail investors and financial pros has grown steadily over the past two years.
Regardless of who is reporting earnings, it’s consistently landed as the top search. With a 1-year performance of +200% and a 10-year performance of almost 20,000%, it’s not hard to understand why. And it’s all thanks to the AI boom. Yet, after its initial boost in production and sales, there are two questions everyone wants to be answered:
Based on the latest quarterly earnings, here’s what we think. Nvidia’s Business Graphics cards aren’t just for gamers anymore. Their ability to perform the same process simultaneously makes it invaluable to AI models. Companies like Alphabet (GOOGL) and Meta (META) are spending billions to acquire the latest and greatest AI chips, mainly from Nvidia. In fact, they account for ~40% of Nvidia’s sales. Nvidia’s chips are so desirable that a single unit of one of their high-end models could cost more than $50,000! The company’s business breaks down into two main categories:
Management segments these further into data centers, gaming, professional visualization, and automotive. With data center revenues leading the way, many wonder if the growth can continue at this pace. Management says it can, as they call more than 2,000 AI startups customers. Plus, Nvidia is aggressively designing its new line of chips to bring them to market as quickly as possible. Financials
Source: Stock Analysis What’s really impressive about Nvidia isn’t just its revenue growth but the margin expansion. As the company has scaled, profit and free cash flow margins have more than doubled in a year. So far, the company has taken its more than $25 billion in free cash flow and used half to repurchase shares while stuffing the rest into investable securities. Valuation
Source: Seeking Alpha With Nvidia’s share price close to $1,000, its valuation has stretched to 80x earnings and cash. Yet, its super sales growth, which drops entirely to the bottom line, means the forward multiples are half what we see today. No other big name, from Tesla (TSLA) to Apple (AAPL), can say the same. Growth
Source: Seeking Alpha As we noted earlier, the revenue growth is impressive. Yet, the EBITDA and net income expansion is what puts Nvidia in a class of its own. How many mega-cap or even large-cap companies do you know that boast a 3-year EPS average growth of over 90%? Profitability
Source: Seeking Alpha Nvidia’s high profitability is a testament to its design-only business model. Rather than make the chips themselves, they focus entirely on creating the next generation of GPUs, outsourcing the manufacturing to companies like Taiwan Semiconductor.
Our Opinion 10/10 Nvidia will eventually slow down as companies fill their data centers with AI chips. But until then, the race for faster outputs will keep Nvidia’s chips in high demand. We expect the company to see sales double from here, even if it takes a year or two. And in the short-term, the stock split should also offer an additional boost to share prices. |
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