Is Nvidia stock still a\u00a0buy?<\/p>\n
This is the question on many investors\u2019 minds.<\/p>\n
NVDA stock tripled in the first half of 2024, but has dropped 24%\u00a0since:<\/p>\n
I believe this pullback is a buy-the-dip opportunity. Here are 3 reasons\u00a0why\u2026<\/p>\n
It was another monster quarter for Nvidia\u00a0(NVDA)\u2026<\/p>\n
Here\u2019s a quick\u00a0rundown:<\/p>\n
Total revenue increased 122% from the same quarter last year to $30\u00a0billion.Data center revenue\u200a\u2014\u200aan approximation of artificial intelligence (AI) revenue\u200a\u2014\u200ajumped 154% to $26.3\u00a0billion.Earnings grew 168% to $16.6 billion, or $0.67 per\u00a0share.<\/p>\n
Despite reporting record quarterly results that beat Wall Street\u2019s estimates, Nvidia\u2019s stock sold off. Investors are concerned about: 1) the durability of big tech\u2019s spending on Nvidia\u2019s products; 2) Blackwell (Nvidia\u2019s next-gen AI chip) production delays; and 3) gross margin compression.<\/p>\n
I don\u2019t see those issues being as bad as some say they\u00a0are.<\/p>\n
First of all, big tech companies showed no signs of slowing their rate of spending on Nvidia\u2019s products anytime soon. In fact, they\u2019ve all flat out said they plan to continue or accelerate their rate of AI investments in the coming quarters. I\u2019ll explain more about this in a\u00a0moment.<\/p>\n
Concerns surrounding Blackwell production delays are similarly misplaced in our view. A three-month delay in rolling out tech like this\u200a\u2014\u200awhich is insanely difficult to design and manufacture\u200a\u2014\u200ameans absolutely nothing. Also, after listening to Nvidia CEO Jensen Huang\u2019s most recent comments about Blackwell, it\u2019s hard to see any real delay at all. Huang said the company\u2019s started volume production of Blackwell and that it will start shipping in the fourth quarter, which was always the expected launch time\u00a0frame.<\/p>\n
Regarding the margin compression concern, Nvidia\u2019s gross profit margin fell from 78.4% two quarters ago to 75.2% last quarter. But this is also a non-issue. It\u2019s hard to state how impressive a mid-70% gross margin is in the fabless semiconductor space. Other than Nvidia, the world\u2019s three largest fabless semiconductor companies are Qualcomm (QCOM), Advanced Micro Devices (AMD), and Broadcom (AVGO). These three companies, all of which are very profitable, operate with gross profit margins ranging from 48% to 65%. Nowhere near Nvidia\u2019s gross\u00a0margin.<\/p>\n
Long story short, Nvidia continues to fire on all cylinders.<\/strong><\/p>\n Investors are afraid big tech will slow down spending on Nvidia\u2019s AI chips. When in fact, spending is accelerating\u2026<\/p>\n Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), and Meta Platforms (MAETA)\u200a\u2014\u200athe so called hyperscalers\u200a\u2014\u200aare all ramping up their AI investments:<\/p>\n Collectively, hyperscalers spent $52 billion in 2Q of 2024 on AI, up +54% from just a year ago. And those are just four companies\u2026<\/p>\n Elon Musk\u2019s AI startup xAI just built a cluster of 100,000 Nvidia H100 AI chips, tripling the previous\u00a0record.<\/p>\n Bottom line: While the spending spree on Nvidia\u2019s products will slow eventually, it\u2019s not going to happen anytime\u00a0soon.<\/strong><\/p>\n Most investors think Nvidia is way overvalued. But that\u2019s hardly the\u00a0case\u2026<\/p>\n Yes, it\u2019s trading at 31.5X forward earnings, which is certainly not\u00a0cheap.<\/p>\n But realize that Nvidia is trading on the cheaper side of its forward-earnings valuation in the last 3\u00a0years:<\/p>\n Source: Koyfin<\/em><\/p>\n Because although its stock price has surged, its expected profits have surged even\u00a0faster.<\/p>\n Nvidia\u2019s trades at a cheaper valuation than its closest competitors\u200a\u2014\u200aAMD (AMD) and Intel (INTC)\u200a\u2014\u200aeven though it\u2019s running a far superior business:<\/p>\n Source: Koyfin<\/em><\/p>\n Conclusion: Nvidia stock looks attractive both from the fundamental and valuation perspective. Buy the dip on\u00a0NVDA.<\/strong><\/p>\n ***<\/p>\n P.S: For more insights and analysis, <\/strong>subscribe to my investing letter The\u00a0Jolt\u26a1<\/em><\/strong><\/a>.<\/em><\/strong><\/p>\n I publish fresh research every\u00a0M\/W\/F.<\/p>\n Click here to subscribe.<\/a><\/p>\n \u2014 Stephen McBride, Chief Analyst at <\/em>RiskHedge<\/em><\/a><\/p>\n 3 reasons why Nvidia stock is still a buy despite dropping 24%<\/a> was originally published in Coinmonks<\/a> on Medium, where people are continuing the conversation by highlighting and responding to this story.<\/p>","protected":false},"excerpt":{"rendered":" Is Nvidia stock still a\u00a0buy? This is the question on many investors\u2019 minds. NVDA stock tripled in the first half of 2024, but has dropped 24%\u00a0since: I believe this pullback is a buy-the-dip opportunity. Here are 3 reasons\u00a0why\u2026 #1 Investors are wrong to worry about Nvidia\u2019s earnings results\u00a0\u2026 It was another monster quarter for Nvidia\u00a0(NVDA)\u2026 […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-3851","post","type-post","status-publish","format-standard","hentry","category-interesting"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/3851"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3851"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/3851\/revisions"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3851"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3851"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3851"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}#2 AI spending is showing no signs of slowing\u00a0down\u2026<\/h3>\n
#3 Nvidia trades at a reasonable valuation\u2026<\/h3>\n