You might know Nvidia (NASDAQ:NVDA) mainly as a maker of graphics cards for video game consoles. However, Nvidia is becoming a power player in the artificial intelligence market. NVDA stock could move higher over the coming quarters as machine learning is a major theme of 2023, and Nvidia’s chief executive clearly wants the company to be an AI leader.
This doesn’t mean you have to invest right now. Nvidia shares get a “B” rating rather than an “A” because there may be valuation concerns. Indeed, Nvidia’s price-to-earnings (P/E) ratio of 130.3x, price-to-book (P/B) ratio of 34.78x and price-to-sales (P/S) ratio of 25.15x might be off-putting to some value-focused investors.
On the other hand, a seemingly pricey stock can still climb higher and NVDA stock could reach its prior peak of around $330. Considering Nvidia’s Street beats and focus on machine learning, it shouldn’t be too surprising if the company’s shares gain value in the near future.
Nvidia’s Inflection Point for AI
So, let’s start with the raw data. For 2022’s fourth quarter, Nvidia’s revenue of $6.05 billion was down 21% on a year-over-year (YOY) basis. However, due to rising inflation, hardly anyone should expect a tech business to have fared better in 2022 than in 2021.
What’s important is that Nvidia’s quarterly revenue beat Wall Street’s expectation of $6.02 billion. Additionally, Nvidia’s adjusted earnings per share (EPS) of 88 cents exceeded the analyst community’s forecast of 81 cents.
What really caught investors’ attention, however, were some statements made by Nvidia CEO Jensen Huang. He boldly declared, “AI is at an inflection point, setting up for broad adoption reaching into every industry.”
Huang assured that his company is “set to help customers take advantage of breakthroughs in generative AI and large language models.”
In addition, the CEO touted Nvidia’s “new AI supercomputer, with H100 and its Transformer Engine and Quantum-2 networking fabric,” reporting that it “is in full production.”
Analysts Raise Their Price Targets on NVDA Stock
By now, you should be getting a clear message that Nvidia is fully committed to the machine-learning market. Nvidia specifically stated that it is “partnering with leading cloud service providers to offer AI-as-a-service that provides enterprises access to the company’s AI platform.”
The combination of Nvidia’s earnings beats and machine-learning focus prompted some analysts to re-evaluate NVDA stock. For example, Piper Sandler analysts hiked their price target from $225 to $275. They view Nvidia as “the only legitimate way to play generative model training and inference today.”
Analysts with Citi, meanwhile, see Nvidia shares as “the best pure play on generative AI adoption.” Thus, the Citia analysts increased their price target from $210 to $245.
Meanwhile, Needham analysts lifted their price target on NVDA stock from $230 to $270. Also, BMO Research analyst Ambrish Srivastava issued a price-target raise from $240 to $255 on Nvidia shares. Notably, both the Needham analysts and Srivastava cited Nvidia’s involvement with AI.
What You Can Do Now
Certainly, Nvidia isn’t the only publicly tradable company with a machine-learning angle. Nevertheless, the company’s chief executive is clearly committed to pushing the boundaries of AI.
Perhaps you agree with Huang that AI is an at “inflection point.” If you’re not too concerned about Nvidia’s valuation, then a small position NVDA stock might be warranted. It’s a way to get exposure to the machine-learning industry, and to a generally solid technology company, in 2023.
— Louis Navellier and the Investor Place Research Staff
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Source: Investor Place