Nvidia (NVDA +2.59%) has been at the forefront of advancements in artificial intelligence (AI) with its cutting-edge chips used in the latest technologies. While its sales growth has been slowing down a bit, the company's overall financials remain robust. And as long as there's ample demand for its AI chips, the stock can continue soaring.
The good news is that CEO Jensen Huang doesn't see a slowdown coming. The company is coming off another stellar quarter, and Huang believes there's a "revolutionary" transition on the horizon, which could mean even more opportunities for his company in the future.
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The potential for AI to do even more
On Nvidia's most recent earnings call, Huang said that "the transition to agentic and physical AI will be revolutionary, giving rise to new applications, companies, products, services." You've probably already heard of agentic AI, which can perform more complex tasks than chatbots, involving multiple steps. A common example is booking travel based on specific parameters and requirements. But agentic AI has the potential to do even more, and it's still in the early innings.
NASDAQ: NVDA
Key Data Points
Physical AI, however, is what the company says is "the next leg of growth" for its business. Physical AI is where AI interacts with machines and connects the digital world to the physical world, such as with robotics and autonomous vehicles.
It's a huge opportunity for AI that could truly transform industries in far more significant ways than just chatbots. Nvidia's Chief Financial Officer, Colette Kress, referred to it as a multitrillion-dollar opportunity.
Nvidia continues to fire on all cylinders
On Nov. 19, Nvidia released its latest quarterly numbers, which showed incredible growth. Revenue of $57 billion for the period ending Oct. 26 was a new record, rising 62% year over year.
Just a few years ago, Nvidia wasn't even generating that much on an annual basis, let alone bringing in that much per quarter. The company's rise has been phenomenal, and to hear that there is much opportunity out there is certainly encouraging for long-term investors.
Meanwhile, the tech company is expecting more growth for the current quarter, with sales projected to be up around $65 billion, and gross profit margins to be about 75%. It's a truly fantastic performance for a business that looks unstoppable at this point.
Is Nvidia a no-brainer buy at this stage?
Nvidia is the most valuable company in the world, with a market cap of $4.3 trillion. Based on analyst projections, however, it's trading at a forward price-to-earnings multiple of only 23. By comparison, the S&P 500 average is a multiple of 21. Nvidia is trading at just a slightly higher premium than the average stock on the index. A higher multiple surely seems warranted given its impressive numbers and opportunities.
There is some risk with the stock, however, because a lot ultimately hinges on AI-fueled growth. There is a load of potential out there with AI, but many companies aren't seeing a payoff from their investments in the technology. And at a time when the economy looks to be on shaky ground, a healthy dose of skepticism may be warranted, as there could be some pullback on AI spending in the near future.
However, if you're looking at the long term and are willing to hang on for five years or more, then Nvidia can potentially be a great investment to hang on to, given its dominance in AI. While I wouldn't say it's a no-brainer buy, given the question marks around AI these days, there's clearly a lot of upside left for the stock.
