Certainly, divergent views continue to build in the world of technology investors and the analysts that cover this sector.
Some clearly believe that spending has gotten out of control. Whether we look at past spending cycles around other innovative technologies like crypto or the metaverse, today investors are starting to demand profitability for companies that are ultimately doing the buying of key infrastructure to support their AI goals.
For Nvidia (NVDA), the world’s largest maker of high-performance chips, and the world’s first $5 trillion company valued on the back of extremely robust spending trends within the AI ecosystem, a potential slowdown in orders is a big concern. While Nvidia’s valuation has come down considerably thanks to this recent dip in market sentiment, some analysts believe the company’s recent blowout earnings report could be a signal to go against the crowd right now.
“Bears have missed every transformational tech name the last few decades worried about valuation and will mis these next few years of the tech bull market while hibernating in their caves. As someone like myself that spends so much time globally seeing the AI Revolution play out and gauging demand in the Asia supply chain, we believe this is still the Top of the 3rd inning in the AI Field of Dreams game being played,” Ives wrote.
Let’s examine Wedbush analyst Dan Ives, who is once again stepping up to the plate with a very bullish thesis around Nvidia and the overall AI trade right now.
When looking at Nvidia’s underlying fundamentals, it is clear that the company’s recent earnings report would have – in any other market other than today’s – led to rapid price appreciation for shareholders.
During the company’s most recent quarter, Nvidia brought in $57 billion in revenue and earnings per share of $1.30, both well above analyst expectations. Notable strength from Nvidia’s core data center segment, as well as outperformance in compute and networking, drove these record results.
At a current forward multiple of 42 times earnings, Nvidia definitely isn’t a cheap stock. But, this is the company’s most attractive multiple in some time, suggesting the company is fulfilling most investors hopes, as well as growing into its valuation over time.
