Nvidia (NASDAQ:NVDA) has been riding a rocket ship of growth ever since the age of AI dawned with the release of ChatGPT roughly two years ago. Multiple quarters of triple-digit, year-over-year growth have propelled NVDA into one of the world’s most valuable companies, with a valuation of over $3 trillion.
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However, even a rocket ship eventually encounters resistance. While Nvidia’s future looks undeniably promising, its meteoric rise has prompted some investors to pause and reconsider. Sky-high share prices are sparking debates over whether the stock’s valuation has soared too far, too fast – and whether the pace of its phenomenal growth might start to taper off in the years ahead.
One top investor, known by the pseudonym Nexus Research, remains unfazed by the skeptics and sees a brighter horizon for Nvidia’s journey.
“NVDA remains one of the cheapest AI stocks,” declares the 5-star investor, whose portfolio performance places them among TipRanks’ top 5% of stock market experts.
“Despite rising competition, Nvidia’s pricing power remains second to none, conducive to enviable profit margins,” the investor adds. These healthy margins provide a major boost for NVDA’s projected EPS growth rate over the coming years.
This makes NVDA not so expensive after all, according to Nexus, especially when compared to other mega tech stocks. The investor highlights that Nvidia’s Forward Price-to-Earnings Growth (PEG) multiple is among the lowest within the ‘Magnificent 6’ tech giants (excluding Tesla). The only company with a cheaper Forward PEG is Alphabet, which faces its own challenges with ongoing antitrust scrutiny.
“At this valuation, Nvidia’s shares are worth buying,” the investor asserts. However, Nexus does provide some words of caution to would-be buyers, noting that “NVDA remains a volatile stock prone to significant draw-downs in the share price.”
With this conviction, Nexus rates Nvidia shares as a Buy, reaffirming the company’s status as the ‘king of AI.’ (To watch Nexus Research’s track record, click here)
Wall Street seems to agree. With an impressive 40 Buy recommendations and just 4 Holds, Nvidia stock boasts a Strong Buy consensus rating. Analysts peg the stock’s 12-month average price target at $175, signaling potential upside of 32%. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
