Nvidia's Soaring Success: Too Late to Buy?

Key Points

• With a 239% surge in 2023 and almost 60% year-to-date, Nvidia maintains its lead in the market fueled by AI demand.
• Analysts unanimously predict further growth for Nvidia, endorsing its market dominance.
• Despite high valuations, Nvidia remains promising for 2024, offering potential for continued expansion.

At the forefront of the market surge stands Nvidia NASDAQ: NVDA, continuing its meteoric rise into the new year. Last year’s champion stock has wasted no time in extending its winning streak, mirroring its outstanding performance from the previous year. 

In 2023, Nvidia soared an astonishing 239%, leaving its tech peers trailing far behind. The catalyst behind this extraordinary growth was the unprecedented demand for its products, driving the company to deliver exceptional earnings quarter after quarter. 

Now, as we navigate through 2024, Nvidia shows no signs of slowing down, already boasting an impressive 60% year-to-date surge and a staggering 238% leap over the previous year, solidifying its position as the third-largest company by market capitalization, trailing only behind Microsoft and Apple, with a valuation exceeding $1.97 trillion.

Nvidia Continues its Dominance

Throughout the past year, Nvidia's trajectory has been a testament to its dominance in the semiconductor industry, fueled by the relentless expansion of Artificial Intelligence (AI) applications. 

The company’s meteoric rise over the past year has seen it become the SPDR S&P 500 ETF NYSE: SPY fourth top holding, with an impressive 3.01% weighting. More reflective of its sector dominance is its massive weighting in the VanEck Semiconductor ETF NASDAQ: SMH, which currently stands at 19.77%.

Each milestone quarter reaffirmed Nvidia's prowess, with its latest earnings report on February 21st, 2024, showcasing yet another remarkable performance. The computer hardware giant reported an EPS of $5.16 for the quarter, surpassing analysts' estimates by a notable margin of $0.95 and generating a revenue of $22.10 billion, far exceeding analyst expectations of $20.40 billion. This staggering achievement represents a 265.3% year-over-year increase in quarterly revenue, underscoring Nvidia's unparalleled growth trajectory.

Looking ahead, Nvidia remains poised for further expansion, with earnings projected to grow by 9.23% in the coming year, reaching an estimated $23.78 per share. The company's relentless innovation and strategic positioning continue to garner widespread confidence among investors and analysts alike.

Analysts Remain Bullish and Forecast Upside

Analysts remain steadfast in their bullish outlook for Nvidia, recognizing its unrivaled market position and growth potential. With an impressive forty analyst evaluations yielding a Moderate Buy rating, Nvidia is one of the market's most closely monitored and sought-after stocks.

Notably, the consensus price target suggests an upside of over 8% for the stock despite its already substantial appreciation YTD and over the past year. 

Of the forty analyst ratings, one has the stock as a strong buy, thirty-six as a buy, and three as a hold. Not a single analyst has the company rated as a sell for the first time in over a year.

Is it too Late to Buy?

The enduring scarcity of Nvidia's products and its evident technological superiority over competitors provide a bullish outlook for the stock. Despite its current inflated P/E ratio of 66 and a forward P/E of 26.75, which signal a more modest valuation, Nvidia's shares appear reasonably priced, especially considering its compelling market position and recent blowout earnings. Considering these factors,  the AI stock holds promise for further upward momentum throughout 2024.

From a more technical analysis perspective, the stock currently has an RSI of 71.61, signaling that it may have entered overbought territory in the short term. With the price greatly extended from its key moving averages, a break below its rising 5-day SMA could signal a pullback. Given the positive momentum behind the company and stock, a pullback might be an excellent entry for a longer-term trade or investment and will likely be met with buying.