Nvidia (NASDAQ: NVDA) precipitated some jaws to drop with its fourth-quarter outcomes introduced a few weeks in the past. The chipmaker’s income soared 265% yr over yr to a report excessive. Its usually accepted accounting rules (GAAP) earnings skyrocketed by 586%. Free money circulate jumped practically 6.5x.
Any means you take a look at it, Nvidia’s development story is spectacular. However can the corporate continue to grow by leaps and bounds? These two numbers scream an emphatic “sure.”
Executives need extra AI — and shortly
Boston Consulting Group (BCG) not too long ago surveyed greater than 1,400 C-suite executives. These company leaders spanned 14 industries and 50 markets. Regardless of their different backgrounds, most of those executives have been in settlement on two key issues.
First, BCG discovered that 85% of the executives surveyed acknowledged that they plan to extend their group’s investments in synthetic intelligence (AI) and generative AI in 2024. Apparently, that quantity is considerably larger than the 71% of respondents who plan to spice up general tech spending.
Second, a whopping 89% of executives surveyed by BCG ranked AI and generative AI as considered one of their prime three expertise priorities for this yr. Many of those leaders have been dissatisfied with their organizations’ progress up to now in adopting AI and generative AI.
Whereas these two numbers have been the important thing takeaways, for my part, from BCG’s survey, there was one thing else that jumped out to me. Greater than half (54%) of the executives mentioned that they count on to acquire price financial savings from AI this yr. BCG quoted Hans Vestberg, CEO of Verizon Communications, as saying, “In each step of the AI journey, we acquired increasingly environment friendly. The distinction with GenAI is that the extent of effectivity is a lot larger.”
Nice information for Nvidia
These sky-high numbers reflecting that executives need extra AI (and particularly, generative AI) should not be stunning. Nvidia CEO Jensen Huang mentioned in his firm’s fourth-quarter press launch, “Accelerated computing and generative AI have hit the tipping level. Demand is surging worldwide throughout firms, industries, and nations.”
Dell Applied sciences COO Jeff Clark additionally confirmed in his firm’s newest quarterly replace that the demand for graphics processing items (GPUs) is exceptionally robust. Clark famous that “most prospects are nonetheless within the early phases of their AI journey.”
It is not simply firms which are leaping on board the AI bandwagon. Nvidia CFO Colette Kress talked about within the This autumn convention name, “International locations world wide are investing in AI infrastructure to assist the constructing of large-language fashions in their very own language, on home knowledge, and in assist of their native analysis and enterprise ecosystems.”
All of this could add as much as sustained gross sales development for Nvidia in 2024 and virtually actually past. Its Hopper structure and InfiniBand networking have turn out to be the de facto commonplace for AI infrastructure.
Income development does not at all times translate to inventory development
I do not assume there’s any doubt by any means that Nvidia’s income will proceed to develop by leaps and bounds. The demand for AI is rising sooner than the provision for GPUs. However does that imply Nvidia inventory will proceed hovering as properly? Not essentially.
The potential drawback is that Nvida’s share worth already displays an amazing quantity of anticipated development. Famous valuation skilled Aswath Damodaran thinks that Nvidia inventory is value practically twice what he calculates its honest worth is predicated on compound annual income development of greater than 32% over the subsequent 5 years.
In fact, Nvidia may ship stronger income development than Damodaran’s mannequin assumes. Traders may proceed piling into the inventory no matter valuation. May Nvidia’s share worth additionally develop by leaps and bounds properly into the long run? Maybe. Nonetheless, the numbers do not scream “sure” as emphatically as they do for the corporate’s income development.
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Keith Speights has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Nvidia. The Motley Idiot recommends Verizon Communications. The Motley Idiot has a disclosure coverage.
Can Nvidia Hold Rising by Leaps and Bounds? These 2 Numbers Scream an Emphatic “Sure.” was initially revealed by The Motley Idiot
