NEWSLETTER
Chips manufacturer Nvidia (Nasdaq: NVDA) Now it is worth $ 3.4trn. Nvidia's shares rose 1,797% in the last five years.
Yes, you read it correctly. 1,797%.
Therefore, someone who puts £ 20k in the technology firm (already well established) in February 2020 would now be sitting in a possession that is worth only less than 380k.
Given such a career, it might seem that Nvidia goes to a fall, and maybe it is.
But, in fact, there are also reasons to be optimistic about where I could go from here.
Here are a couple of reasons why I believe that Nvidia's actions could be fired in price from today's level in the coming years.
Unique position in the high growth market
The key reason behind the recent growth of mass prices has been the emotion of investors for artificial intelligence. Companies are already spending billions of pounds buying chips to help them optimize the opportunities of ai.
Warren Buffett likes companies to have a “pit” or a competitive advantage. Nvidia has a lot of patented technology that helps differentiate its rivals chips.
It may be that, after an explosion of initial expenses related to ai, the chip market cools and Nvidia's sales fall. On the other hand, recent activity could be the beginning of something much bigger.
So I think Nvidia could benefit from having a unique position in a large and fast -growing market.
In its most recent quarterly sales update, the company's executive director said: “The age of ai is at full steam, promoting a global change to Nvidia computing“
That makes it sound as if sales could continue to increase.
Profit could grow even faster Thanks to the economies of scale and the power of the company's prices. The third quarter, for example, saw a year -on -year income of 94%, but net income grew by 109%.
If such intoxicating growth continues, sales almost doubled in just 12 months, the investment case will grow and Nvidia shares could increase.
Nvidia could be said that it still has an attractive assessment
Despite its meteoric increase in the last five years, I think it must be argued that the Nvidia stock has an attractive price.
Its price to profits ratio (p/e) at this time is 55. That is high and, in fact, the valuation is the reason why I currently have no plans to invest in the company, since I think it offers me a margin insufficient security as an investor.
That said, although the P/E relationship is remarkably higher than some leading technological actions, it is cheaper than some.
TeslaThe 174 P/E ratio is more than three times that of NVIDIA, despite the weakest commercial growth perspectives based on the performance of last year. Meanwhile, some companies that use substantially are far more expensive. Palantir It has a 661 P/E ratio.
If Nvidia can increase your profits strongly, and as I explained above, I think it can, the prospective relationship is much lower than the 55 today. Therefore, if the market maintains the valuation approximately where it is now, the highest profits could mean a jump in the price of the shares.
(Tagstotranslate) category. Growth-Shares
