Nvidia (NASDAQ: NVDA) has enjoyed one of the best years in its 30-year history, with its stock up 214% since Jan. 1. The company has thrived amid a boom in artificial intelligence (AI), producing the hardware necessary to move the industry forward. Countless companies across tech have rushed to join the high-growth sector, with Nvidia becoming the go-to for anyone seeking AI chips.
While other chipmakers are scrambling to produce hardware that can match the performance of Nvidia, the company is massively profiting from its spot at the top. So it’s a good idea to learn more about this tech giant and potentially invest in its promising future.
Here are three things about Nvidia that smart investors know.
Before 2023, Nvidia was best known for its leading role in the PC gaming market. The company has held an over 80% market share in discrete graphics processing units (GPUs) for years thanks to PC gamers worldwide using the chips to power their home computers. With games growing in complexity, PC users have become one of the first to adopt the high-performance hardware. However, other markets have begun turning to GPUs like Nvidia’s to take their tech to the next level.
Nvidia’s years of dominance in GPUs have perfectly positioned it to flourish in the expanding AI market. For instance, the cloud market heavily relied on central processing units (CPUs) for years, which bolstered the businesses of companies like Advanced Micro Devices and Intel. However, as more cloud companies pivot their services to AI, GPUs are quickly becoming the most crucial tool in the industry. And Nvidia offers some of the best in the business.
AMD and Intel each have a presence in GPUs, with market shares of 10% and 3%, respectively. However, it’s been challenging to cut through Nvidia’s command of the market. The longer it takes these companies to release products equal to Nvidia’s offerings, the harder it could be to dethrone the chipmaker in AI.
Numerous companies have been heavily investing in India this year, with Amazon and AMD just a few of the world’s tech leaders to sink millions into developing the region. India is one of the fastest-growing major economies and is set on becoming a hub for all things tech, including chip production, cloud computing, and AI.
So it’s not surprising that Nvidia is taking its place in the booming country by partnering with two of India’s largest conglomerates: Reliance Industries Limited and Tata Group. Nvidia CEO Jensen Huang announced the news on Sept. 8, calling India “one of the largest AI markets in the world.” The companies plan to work together to build an AI computing infrastructure and platforms for producing AI solutions.
The project will be based on Nvidia’s GH200 Grace Hopper Superchip and its DGX Cloud, which makes it easier for businesses to train employees in AI technology. Nvidia’s venture into India allows it to grow its international dominance in AI, using its design language to create a standard that will make it difficult for competing chipmakers to succeed.
Nvidia shares skyrocketed this year, with many analysts voicing concerns that it could all be hype that won’t last forever. However, stockholders were proven right after the company released earnings for its second quarter of fiscal 2024 (ending July 2023). Revenue jumped 101% year over year during the quarter, mainly driven by a 171% rise in data center revenue thanks to increased demand for GPUs for AI applications.
Nvidia’s glowing quarter offered Wall Street proof that AI might just be as lucrative for the company as its recent bull run suggests. In fact, Nvidia expects to deliver more growth in its current quarter as supply strains are improving quicker than expected.
The company’s promising earnings and growing dominance in AI have made analysts bullish. Nvidia’s average 12-month price target of $638 is about 40% higher than its current position. Meanwhile, 50 out of 53 analysts who cover Nvidia currently rate its stock a buy/strong buy.
It is still relatively early days in AI, giving Nvidia massive growth potential. As a result, it’s worth considering an investment in this leading tech company.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon.com, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel and long January 2025 $45 calls on Intel. The Motley Fool has a disclosure policy.
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