Any Nvidia (NASDAQ:NVDA) stock outlook has to start by considering its staggering gain of more than 240% last year. The company’s share price has risen nearly 46%, and we’re only now heading into mid-February.
Nvidia could have another successful year because of the high demand for its AI solutions. Nvidia is a favorable choice because of the ongoing AI trend. The below NVDA stock outlook says this company is still a strong buy.
AI Demand Continues Unabated
Nvidia dominates about 81% of the market for AI chips used in cloud and data centers. Until AMD‘s (NASDAQ:AMD) AI chips gain traction, this will be the case for the time being.
While there has certainly been “AI hype” in the past several months as businesses have tried to hop on the artificial intelligence train with their own “AI-enhanced” products. What is not hyped up, however, is the demand for Nvidia’s chips.
Because of U.S. export, Nvidia’s chips have become more expensive in Asia, but this has not quelled demand for these chips in the region. The RTX 4090 has been difficult to find in Taiwan and parts of Southeast Asia, for example.
The AI craze has also hit Japan with some local semiconductor equipment manufacturers seeing a boost in revenue and profits off of sustained demand for AI chips. Nvidia also announced a $1 billion deal to provide India-based companies with its AI chips.
This is likely just the beginning of the ripple effect these chips are having on the international stage.
According to the Financial Times, Nvidia invested in over 2 dozen AI start-ups in 2023, which made the chip maker the most active investor in the space for that year. With more than $18 billion on its balance sheet as the third quarter of 2023, it’s no wonder why the company has been eager to invest.
These investments can work out in the long run, especially as the AI space goes beyond generative AI and includes various kinds of applications. Nvidia will probably always be there to provide the chips to train AI models, but the chip maker can get the best out of the AI boom by making bets on capable companies.
NVDA Stock Outlook: Valuation Not Too High
Nvidia’s stock is trading at a record high, but its forward P/E ratio is still well below where it was 12 months ago. Then, the stock was trading at over 54.2x forward earnings.
Nowadays, the chip maker’s stock trades for just 36.3x forward earnings. This puts Nvidia’s earnings multiple below that of its key competitor, Advanced Micro Devices (NASDAQ:AMD)
That’s all to say, despite Nvidia’s valuation looking expensive, it is much less than it was in prior months. The company’s continued growth in the coming months will likely justify where its multiple is sitting now.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
