Semiconductor stalwart Nvidia (NASDAQ:NVDA) shows no signs of slowing down, with NVDA stock posting a record high. Reaching a price of over $1,140 in the afternoon session, the security found itself up over 7% against Friday’s close. Bolstering sentiment is a strong endorsement by Tesla (NASDAQ:TSLA) CEO Elon Musk, as well as speculation about NVDA’s stock-split announcement.
First, it’s difficult to ignore the outright performance of the technology juggernaut. According to data from Morningstar, prior to the opening of Tuesday’s session, NVDA stock was sitting on a three-day consecutive winning streak, gaining 16.55% during this period. This represented the best three-day stretch since late February.
Musk provided the immediate catalyst, who stated that Nvidia would supply his artificial-intelligence-based startup, xAI. Over the weekend, according to Investor’s Business Daily, the tech enterprise raised $6 billion in its latest funding round. The company plans to build a supercomputer to undergird its artificial intelligence (AI) chatbot.
Another tailwind smiling on NVDA stock is speculation tied to its 10-for-1 share split. Effective on June 7, IBD notes that the measure “will bring the price of one share down to just over 100.” However, the real excitement may be that a lower price would allow NVDA to qualify for inclusion in the Dow 30, which is a price-weighted index.
NVDA Stock Attempts to Grow into Its Valuation
Another point brought up by IBD is that NVDA stock prompted a buy signal ahead of its blockbuster fiscal first-quarter earnings report. That was likely due to a major tech conference hosted by Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) that demonstrated the capacity of AI to improve search engine results. In one of the demonstrations, an Android feature alerted users to scams during phone conversations.
It should be noted that Alphabet’s Google uses processors from Nvidia’s competition. However, IBD points out that Nvidia dominates the AI segment of the data center market. Therefore, NVDA stock tends to rise based on AI-related catalysts. Indeed, the security has more than doubled since the beginning of the year.
Further, Grand View Research states that the global generative AI market size reached a valuation of $13 billion last year. Experts believe that the sector could be worth $109.37 billion by 2030. If so, that expansion would imply a compound annual growth rate (CAGR) of 36.5% from 2024.
Of course, the main concern regarding NVDA stock is its valuation. Priced at 33.28x trailing-year sales, it’s a hefty premium. However, advocates may point out that analysts call for revenue to reach $110.75 billion in fiscal 2025. Assuming a share count of 2.46 billion, NVDA trades around 25.2x projected sales.
Per Yahoo Finance, the average sales multiple in fiscal 2023 came out to 29.8X. Potentially, then, there’s still room for NVDA stock to grow.
On the date of publication, Josh Enomoto 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.
