First, it is important to note that chasing big rallies in stocks, especially one as significant as Nvidia’s recent surge, is not recommended. The market cap of Nvidia has increased to over $2.62 trillion, making it crucial to wait for a pullback before considering buying. The Investing Club previously had a 2 rating on Nvidia’s shares before the earnings report, and they recommend waiting for a sizeable dip before considering adding to or buying shares. The Club has been holding Nvidia stock since 2019, with a cost basis of nearly $156 per share. Despite the stock reaching above $1050 per share, their price target was raised to $1,200 on Wednesday evening. Nvidia is considered an “own it don’t trade it” stock by the Club, similar to Apple, with Nvidia being one of their top holdings.
Second, for investors who have no shares or have a small position with a cost basis much higher than the current price, buying Nvidia at lower levels may be a good opportunity. The Investing Club emphasizes the importance of investors being educated and taking control of their financial decisions, rather than blindly following their ratings or moves. It is essential to consider the long-term perspective when evaluating Nvidia stock, as it is positioned to benefit from significant technological advancements in generative AI. Valuing corporate fundamentals and looking beyond short-term earnings estimates are crucial for long-term investors when considering a stock like Nvidia.
Third, despite the significant run Nvidia has had, it is essential to look beyond the next 12 months and consider what the world may look like in 10 years. Generative AI has the potential to disrupt various industries, from autonomous vehicles to health advancements and enhanced cybersecurity. Nvidia’s position in both hardware and software solutions makes it well-positioned to capitalize on these advancements. While the current multiple of about 40 times forward earnings may seem high, it is trading around its historical average, indicating potential for future growth. Pullbacks may be expected with a stock like Nvidia, but fundamental earnings growth is driving the stock higher.
In conclusion, the future prospects for Nvidia are promising, driven by advancements in generative AI and the expansion of its automotive, healthcare, and sovereign AI initiatives. It is important for investors to consider the long-term potential of Nvidia and the disruptive technologies it is involved in. While valuations may appear high in the short term, the growth opportunities presented by Nvidia make it a compelling investment for those looking to participate in the AI revolution and technological advancements in the coming years.
