Nvidia (NVDA) Stock Has Made Early Investors a Fortune. Is There Still Room to Run?
Written by Selena Maranjian for The Motley Fool -> Nvidia is a dominant force in semiconductors. Its stock is appealingly valued, given its growth rate. Check out how magnificently Nvidia (NASDAQ: NVDA) stock has performed in recent years: Will AI create the world's first tri
Check out how magnificently Nvidia (NASDAQ: NVDA) stock has performed in recent years:
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
That's enough to turn a single $10,000 investment into more than $130,000 over the past five years, or roughly $1.9 million over the past decade.
That might have you wondering if you missed this boat. Surprisingly, the shares still seem attractively valued.
Check it out: Nvidia's recent forward-looking price-to-earnings (P/E) ratio of 25.6 is well below its five-year average of 36.1. And its recent price-to-sales ratio of 21.5 is below its five-year average of 24. (Those price-to-sales numbers are steep!) Steep valuation measures can be justified, though, when a company is growing briskly.
In its recently reported first quarter, Nvidia posted revenue of $81.6 billion, up 85% from the year-ago quarter. The company has found great success supplying chips to gobs of data centers that are facilitating artificial intelligence (AI) processing, and its first quarter also featured record data center revenue of $75.2 billion, up 92% year over year.
The future matters more than the past to investors, though, and on this count, too, Nvidia looks good -- in part because it's expanding in new directions, such as entering the central processing unit (CPU) market with a new chip . Its data center business is poised to keep profiting handsomely as well, as major tech companies are spending hundreds of billions on data center capital expenditures and are projected to spend trillions on it within a few years.
Given Nvidia's market dominance, promising future, and attractive valuation, I think that it still has plenty of room to run. (The stock and/or the market could pull back in the short term, which is why I suggest maintaining a long-term focus.)
