Nvidia CDR (NVDA) Quote

Nvidia's Stock Is Still A Bargain

May 02, 2024 1:18 PM ETNVIDIA Corporation (NVDA) Stock, NVDA:CA StockAAPL, AAPL:CA, AMD, AMD:CA, INTC, INTC:CA, TSM, TSMWF6 Comments
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KM Capital
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Summary

My previous thesis about Nvidia Corporation has aged well, as the stock has appreciated by 18% since February 7, outperforming the S&P 500.
Nvidia Corporation delivered strong fiscal Q4 financial results with revenue growth of 265% YoY and a significant EPS improvement.
The company's investments in R&D, dominance in the GPU space, and new Blackwell platform position it well for future growth.
My valuation analysis suggests that Nvidia stock is 34% undervalued.
Nvidia Quadro K1200 from a powerful workstation isolated on white
Daniel Chetroni

Introduction

I shared a thesis about NVIDIA Corporation (NASDAQ:NVDA) in early February 2024 with a "Strong Buy" rating. It appears that my optimism was justified because the stock has appreciated by 18% since February 7, while the S&P 500 (SP500) was flat. Today I want to share my insights about recent developments around NVDA from the fundamental analysis perspective.

The demand for GPUs, where Nvidia dominates, appears to be still robust. Nvidia continues investing heavily in innovation, which will likely help the company maintain its position at the forefront of the AI revolution. My discounted cash flow ("DCF") analysis suggests that the stock is still attractively valued, and I am inclined to reiterate a "Strong Buy" rating for NVDA.

Fundamental analysis

NVDA delivered another staggering quarter on February 21 with a $1.5 billion revenue beat against consensus estimates. The positive EPS surprise has also been wide from the company. Revenue grew by 265% YoY and the non-GAAP EPS skyrocketed from $0.88 to $5.16. The EPS profile improvement was achieved thanks to a massive operating leverage as NVIDIA's profitability ratios demonstrated strong improvements shown below.

Chart
Data by YCharts
The company continues capitalizing on its dominance in the GPU space, where NVDA holds an 80% market share. The demand for GPUs is still robust as software companies continue their artificial intelligence ("AI") battle. For example, a couple of weeks ago, Meta Platforms, Inc. (META) introduced its Llama 3 large language model ("LLM"). This model was trained on Nvidia's H100 Tensor Core GPU's.

Another big positive sign is that Nvidia does not only provide hardware for Meta's LLM, but provides a comprehensive solution which also includes software and libraries. The fact that Nvidia partners with giants like META as an ecosystem, and not just a hardware provider, makes META's switching costs much higher and provides NVDA with a moat.

However, Nvidia does not only aim LLMs, but also has a solid footprint in a domain called "real-world AI." During the latest Tesla, Inc. (TSLA) earnings call, Elon Musk shared insights which seem very beneficial for NVDA. He said that his company plans to become the third-largest Nvidia customer because his AI initiatives like autonomous driving ("FSD") and Robotaxi require loads of computing capacity.

Tesla might ultimately deploy 85,000 Nvidia H100 chips by the end of 2024 to train its AI models. This acknowledgement from the world's largest EV company and the most technologically advanced automotive manufacturer is an obvious indication of Nvidia's dominance from the technological perspective.

Chart
Data by YCharts
These are massive positive news for NVIDIA which happened just within the last two weeks, indicate that the momentum in AI is still robust. What is most important is that Nvidia likely remains at the forefront of this secular shift. According to wccftech.com, Advanced Micro Devices, Inc. (AMD) increased its GPU market share in Q4 2023 by two percentage points at Nvidia's expense. However, as the gap between these two companies' investments in R&D is widening and the difference amounts to billions of dollars, I think that AMD has a limited potential to further expand its market share against NVDA. Furthermore, I have confidence in Nvidia's positioning against AMD not only due to higher R&D spending, but also due to the visionary talent of the company's management.

In my previous thesis, I have underlined that Nvidia CEO Jensen Huang and his team have been disrupting the GPU industry for more than the last three decades, and this year's GTC 2024 event has increased my confidence that Nvidia will continue disrupting the way the digital world works. This is crucial because Nvidia does not want to only compete in current markets, but create new markets, "Blue Oceans" as it is called in one famous book.

I am not an AI chips expert, but the new Blackwell platform, which was presented during GTC 2024, appears to mark a significant leap in computing. According to amax.com, this solution is multiple times more powerful than the company's legacy products and performs with much more efficient energy consumption, which will likely lead to lower cost of ownership for data centers. Blackwell's technological superiority is also highlighted by Alex McFarland, an AI expert, who said that Nvidia is setting new industry standards in the realm of AI processing with the company's new platform.

To summarize, Nvidia remains at the forefront of the AI innovation, and its recent release of a disrupting Blackwell architecture appears to be a new standard for the AI solutions industry. The company's investments in R&D outweigh its closest GPU competitor, AMD, by billions of dollars, which likely helps the company to sustain its dominance in the space. I think that having a dominant position in the emerging industry will enable Nvidia to sustain its stellar pricing power, which will ultimately result in expanding profitability for longer.

Valuation analysis

Despite almost a 10% decline in the stock price over the last month, NVDA still has a strong Quant Momentum rating. After the last 12 months' 187% rally, the company's market cap reached $2.13 trillion, and currently NVDA is the third largest U.S. company by market cap after Microsoft Corporation (MSFT) and Apple Inc. (AAPL).

NVDA
SA
Some investors and experts consider NVDA to be substantially overvalued, but I do not think so. First, let me show you how NVDA's forward valuation ratios look against other prominent semiconductor names. The company's forward non-GAAP P/E ratios look in line with Broadcom Inc. (AVGO) and AMD, and the non-GAAP PEG is also sound.

NVDA ratios vs compeititors
SA
Of course, Nvidia's TTM metrics are substantially higher than all rivals. Nvidia's all valuation ratios are also sky-high compared to QUALCOMM Incorporated (QCOM) and Intel Corporation (INTC). However, TTM ratios give us a rear-mirror view, and investing in assets is all about their future potential to deliver growth and profitability. From the perspective of growth, none of the above-mentioned rivals are anywhere close to Nvidia. Therefore, I think that Nvidia's high TTM metrics are justified, which we see from sound long-term forward metrics.

NVDA valuation
SA
Now I must figure out my target price for NVDA, which I will do with the help of the discounted cash flow ("DCF") model. Future cash flows will be discounted with a 9.5% WACC. Due to the positive factors for NVDA's long-term prospects which I share in "Fundamental analysis," I reiterate my aggressive 7% constant growth rate assumption which I used last time for the terminal value ('TV') calculation. From the revenue perspective, I rely on consensus estimates for the base FY 2025 and project a 22.5% CAGR for the next five years. I use a 32.61% TTM levered FCF margin and expect NVDA to be effective in exercising its pricing power, which will help in expanding its FCF margin by 100 basis points yearly. According to Seeking Alpha, there are 2.46 billion outstanding NVDA shares.

NVDA DCF valuation
Calculated by the author
My DCF model suggest that NVDA's shares are 34% undervalued and the target price for the next twelve months is $1,114. That said, the stock is still very attractively valued. I see it both from the multiples and DCF points of view.

Mitigating factors

Recent developments around other big semiconductor names suggest that investor sentiment around semiconductors is cooling down. AMD's stock saw a notable recent sell-off, even after a solid Q1 earnings release with decent guidance on April 30. Intel also reported recently, and the stock suffered a sell-off, but INTC's report was indeed weaker than Wall Street analysts expected. While competitors' struggles might be good for Nvidia from the strategic point of view, as a leading semiconductor company in the world, NVDA's share price is vulnerable to the overall sentiment around the semiconductor industry. This might be a short-term headwind for the share price, and investors should be aware of it.

The American technology sector is full of bright and ambitious, visionary leaders. Not all of them like the monopoly of Nvidia in the GPU market, and I believe that Nvidia's success is a good role model for the new generation of visionary CEOs. For example, Sam Altman from OpenAI wants to build his alternative to Nvidia in GPUs and reshape the industry. While his initiative apparently does not look like an overnight venture, I think that even potential positive headlines regarding Mr. Altman's initiatives developing in this direction might be absorbed by the market as a mounting threat to Nvidia's long-term prospects which will likely undermine the stock price.

There is a great deal of geopolitical uncertainty not only caused by the complex relationships between China and the U.S., but also due to the historical tensions between China and Taiwan. This factor is crucial because Nvidia outsources its manufacturing to the Taiwan Semiconductor Manufacturing Company Limited (TSM) and the supply chain heavily depends on the stability of TSM's operations. I agree that the probability of an armed conflict between China and Taiwan is extremely low, but recent years taught us that even non-military measures like economic sanctions might substantially disrupt business operations. I think that this risk should also be weighted by investors before they decide to opt into NVDA.

Conclusion

Nvidia is likely to remain the dominant force in the emerging advanced chips industry, thanks to its heavy investments in R&D and the visionary talent of its management. The demand for the most powerful GPUs appears to remain strong for longer, which is a big tailwind for NVDA. I think that NVDA is still a "Strong Buy," also because of its still attractive valuation.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

This article was written by

KM Capital profile picture
KM Capital
1.4K Followers

You both are making great points and I want to add perspective as to what I see.

When I started ‘trading many years ago, we looked to invest in companies for R&D, expansion, and generally to help our companies to do well.
I have watched the decay and greed, (think of CEO pay), coupled with technology and deception, corruption, (look at Pelosi trades and overall political enriching via ‘donors for ex.).

The stock market is a card game, entirely now. Your competitors are the fund managers, AI trading algorithms, ‘The “Fed”(Fake Economic Demons), insiders, news of the day, etc.
I will never trust a publicly held company that trades at many times its actual valuations, and reports fluffy BS to “shareholders” and the street. (It’s all of them, especially the Banks & Telecoms).

Nothing new here. You all know this stuff.
It’s time to be Offensive instead of defense when it comes to “trading” these.
My warning is for traders or investors to remember all day long,
Publicly held companies dont care about you even a little. Dont love them back!
Get paid!
Gl I wish all of you most excellent success!
Even “Broken” (just kidding bro, dont blow me up)
Blessings

Let’s rally dude!!!

NVDA RTX reads like science fiction...

https://wccftech.com/nvidia-calls-rtx-the-premium-ai-pc-platform-npus-only-good-for-basic-ai-pcs/

Which company might build the PCs

for such an idea?...

So we watch...LJ

Pension funds and money managers are told, in some cases, which stocks to push and others to avoid, and not because they are bad stocks.

Money, power and influence changes hands behind the scenes.

So the Dubster is not wrong in what he is saying.

I think that's more a question of the power and influence of money. Yes, that surely influences the stock market.

One could compare that power with the law of gravity in nature. Almost.

The larger the planet the larger the force of gravity. That is kind of like money. The reality is that Small money can do almost little other than finding ways to watch it in a timely manner to take advantage. Huge pension funds like Calpers of California employ many trained traders to manage that power. Pension funds and those who make decisions in that process are not there for any individual per se when they lack the education and expertise. Society builds its own ways to delegate as best it can to manage the common wealth. Critics abound in this matter one way or another as we can see claiming things can be improved fortunately at times. Change is part of life and AI may help in this area as well.

Power=MONEY and it's just as like Superpowers rule the world with that power when they also lead in high technology and their knowledge and expertise in superior war weapons and how to deliver them when needed anywhere on the Planet. Sadly it's a tough world but it's the only one we have..

It is understandable that may look unfair other smaller nations same as to retail money in the stock market. Is that fraud and manipulation?

Larger funds always dominate as they move money in many ways in the stock market.

Any wonder successful retail money try to watch how the money is moving? They try watch that money movement to benefit from when prices go up, or short when they sense the prices are heading down.

There isn't much new in that fact in the financial market in that respect. Of course one would like to have that power, and small retail money see manipulation anywhere they can. But reality of life has shown that in all nations and empires and dynasties money=power is the reality in our material life.

Market manipulation and fraud is when laws are broken in the regulated and supervised markets.

Also when abusing the power of money for corruption and for self further enrichment.

NVIDIA has introduced DLSS 3.5 with Ray Reconstruction to Portal with RTX, a reimagining of Valve's hit game with full ray tracing, or path tracing. Moreover, the feature will soon be available for modders in RTX Remix Open Beta so they can revive classic games with better graphics.

"DLSS Ray Reconstruction is an enhanced AI-powered neural renderer that improves ray-traced image quality for all GeForce RTX GPUs by replacing hand-tuned denoisers with an NVIDIA supercomputer-trained AI network, which generates higher-quality pixels in between sampled rays."

So players will be able to enjoy improved fidelity of full ray tracing and dynamic lighting effects as Ray Reconstruction updates lighting effects faster. As a result, "certain patterns associated with reflections are recognized, keeping the image stable and generating high quality reflections."

"Additionally, Ray Reconstruction greatly improves the clarity and fidelity of water reflections, eliminates light speckle artifacts on fine details, such as chain link fences, eliminates ghosting on moving objects, such as ventilation fans, and increases the fidelity of shadows cast from aforementioned moving game elements."

According to NVIDIA, DLSS 3.5 with Ray Reconstruction multiples frame rates on GeForce RTX GPUs up to 6.7 times.

Furthermore, NVIDIA RTX IO, also added to Portal, improves GPU-based loading and game asset decompression, so the game is faster and better looking.

NVIDIA Sets Conference Call for First-Quarter Financial Results

CFO Commentary to Be Provided in Writing Ahead of Call
May 1, 2024
NVIDIA will host a conference call on Wednesday, May 22, at 2 p.m. PT (5 p.m. ET) to discuss its financial results for the first quarter of fiscal year 2025, which ended April 28, 2024.

The general point he is making is that the market is a fraud and manipulated, which is unknowingly supported by pension funds, IRAs and 401k plans, most of which are funneled into the market, with little input from the owners of those funds, thereby perpetuating the fraud.

Generalities you state do not lend themselves to scrutiny of any kind. We don't have anything specific in them but sweeping statements. Cheers.

Good daily session recovering the losses today.

Though, the chart shows Nvda share price in HIGH POLE WARNING on 1-May-2024

Cheers & GLTA

PS: Though the Dailies are so so, the Weekly remains in need of an Uptrend.

If I was a buyer of NVDA, a signal for the day is up.

No sir, I am NOT an “investor”
I also will not elevate myself, criticize or judge individuals.
The reality is exactly what I stated. If you have a specific correction or rebuttal of any my statement, feel free.
Did I state something false?
Blessed indeed, not by my own knowledge or works.

You come across as one happy with your own investing prowess while almost all others in the investing public, in your view happen to be victims of their own lack of knowledge manipulated by whoever somehow or their incompetence.

There is truth in the observation that people all live in their own beliefs and fantasies.

However you seem to feel and believe that you are outside of all those life challenges. Indeed savvy and above all knowing what's the right way.

One happy and aware investor, blessed by the Lord?

Sounds like an enviable condition. Could the "Flip, flip, flip" happen to be among the secret?

There are no good valuations, in regard to publicly held “companies”.
“Investors” are enabling fraud and corruption by blindly contributing to 401K, pensions, IRAs etc. and not actively managing.
Think about the trillions of $ every month that comes from working class sheep.

Fund managers dont care about you.
Dollar cost averaging is for fools.
Diversified portfolio = complacency

Some “investors” will NEVER retire.

$NVDA JENSEN HUANG'S MASSIVE MIC DROP:

"Our total cost of operations is SO GOOD that even when the competitors' chips are FREE, it's not cheap enough"

$NVDA Large OTM Call Prints
By: Cheddar Flow | May 1, 2024

• $NVDA & $TSLA Large OTM Call Prints



Read Full Story »»»

DiscoverGold

Oh good. You’re safe now.
*NVD (2x better) NVDA =pain

Ignored.

Buy Alert: Nvidia Stock Is Still THE Semiconductor Player to Own
May 1, 202406:00 EDT


NVDA
-1.54%

SMCI
-3.54%
After a scary drop earlier in April, Nvidia
NVDA
stock has roared back to life, proving its resilience and that it is the best semiconductor company to own long term. From April 11 to 19, NVDA stock fell by 16%, with a 10% drop in a single day. The company’s shares seemed poised for a significant decline.

Fortunately, the stock quickly bottomed and has come storming back, rising 15% in a week and recovering almost all of its losses. The quick rebound in Nvidia stock comes as analysts continue to issue bullish outlooks for the company, favoring it as a best-in-class semiconductor play.

Upside Ahead for NVDA Stock

Much has been made of the meteoric rise of Nvidia’s stock since the current bull market began in October 2022. Despite some short-lived volatility, NVDA stock has more than tripled in the past 12 months (up 216%).

Nvidia is the second best performer in the benchmark S&P 500 index year to date, having gained 82% since January. Only Super Micro Computer
SMCI
has performed better. Yet for all its success, analysts see more upside ahead for Nvidia.

Currently, the median price target on NVDA stock among 41 Wall Street analysts who cover the company is $1,004 per share. That’s 15% higher than where the stock currently trades.

The consensus rating on Nvidia stock is a “strong buy.” Among the 41 analysts, 39 of them have a “buy” rating on the stock, while two have a “hold” rating. There are no “sell” ratings on NVDA stock at present. Analysts at KeyBanc recently raised their price targeton Nvidia stock to $1,200 and reiterated their “buy” rating.

Reasons to Be Bullish

Analysts are bullish on Nvidia stock for several reasons. The company knocked the cover off the ball with its most recent earnings print for the final quarter of last year.

Nvidia’s sales rose 265% from a year earlier and profits grew 769% year over year, fueled by white hot demand for the company’s chips that are used in artificial intelligence applications, chatbots and models. The guidance issued by Nvidia was also strong. The company is scheduled to report first-quarter results on May 22.

Enthusiasm for Nvidia stock only strengthened after the company unveiled in March its next generation AI microchips called the “Blackwell” series. The first Blackwell chip is called the “GB200” and will ship later this year.

The company also introduced revenue-generating software called “Nvidia Inference Microservice” for use with its Nvidia enterprise software subscription. Management has said that Nvidia is moving to become less of a microchip provider and more of a platform provider.

More recently, Nvidia announced plans to build a $200 million AI center in Indonesia as it expands across the critically important region of Asia. Nvidia’s three biggest markets in terms of revenue generation remain America, Taiwan and China.

While numbers can vary somewhat, the latest estimates place Nvidia’s share of the global market for chips that power AI applications at between 75% and 80%, showing the company’s continued dominance of the sector.

Buy Nvidia Stock

Nvidia stock has been extremely successful, having risen more than 1,800% in the last five years. That success looks certain to continue as the company dominates the market for microchips and semiconductors that power AI.

Analysts remain extremely bullish on Nvidia due to strong demand for its chips, exceptional earnings growth, and new products that will keep the company ahead of its competitors. Investors should be equally bullish. Nvidia stock is a buy.

Nvidia wants to sell their systems to their customers which also doesn’t help Supermicro

Supermicro and NVIDIA have a double-edged sword relationship. The relationship exposes Supermicro to supply chain constraints and soaring chip prices. In early 2023, Supermicro struggled to secure a steady supply of NVIDIA's GPUs. Supermicro also doesn't hold any long-term agreements with NVIDIA or its other suppliers that actually lock them in as exclusive partners.

AMD and Super Micro tumbling, IMHO due to Nvidia growing

Thx DM

Thx CD

In my opinion, since you haven't jumped in already, I would wait and observe where this is going. That would be the safer play here.

I believe earnings should be reported around May 22nd. Could be some volatile price swings from now until then, which may provide a better entry point.

Good luck to you.

NVIDIA RTX Remix gets DLSS 3.5 Ray Reconstruction support

I listened to some of AMD earnings call, they increased mi300x yearly sales .5 billion to 4 billion. I think Nvidia loses that much a year, hearing that makes me feel a lot better towards competition. Answers question from article “ Second, as rival semiconductor companies ramp up their efforts to capitalize on the generative artificial intelligence trend.”

AMD bad news is good news for Nvidia, just wait

NVDA’s Earnings Runway: How Nvidia Stock’s Long-Term Growth Story Makes it a Screaming Buy
Nvidia stock investors won't be wondering "what's next" for long

Investors are growing increasingly worried about “what’s next” for big winners in the space like Nvidia (NVDA).
However, recent developments strongly suggest that this early-mover in the space keeps charging ahead.
Buy Nvidia stock before the pullback turns into a bounce back.

There’s no getting around it. Top AI stocks like Nvidia (NASDAQ:NVDA) have lost momentum. However, the market’s sudden worrying about “what’s next” for big AI winners like Nvidia stock may end up being an advantageous turn of events, for investors entering or adding to positions right now.

Even as a growing number of market participants have been thinking that this AI chip designer’s shares have finally topped out, that may prove to ultimately not be the case. In fact, the next big run-up for shares could be just around the corner.


The market may think “what’s next,” but this early-mover in this fast-growing segment of tech continues to charge ahead, with efforts to level up on its success thus far. With this, while the weakness still lasts, you may want to seize the opportunity, as we’ll explain below.

Nvidia Stock: On the Verge of a Pre-Earnings Rebound?

As recently discussed, two key factors have weighed on shares over the past few weeks. First, there has been increased concern about a slowdown in demand for AI chips. Second, as rival semiconductor companies ramp up their efforts to capitalize on the generative artificial intelligence trend.

There have also been concerns that this too will negatively affect Nvidia’s growth going forward. In the same article, we argued these worries could prove overblown, once the company next releases earnings on May 22. However, considering more recent developments, a rebound for Nvidia stock could arrive far sooner.

May 22

CD you are always the voice of reason. Would you say the after hours share price is a buying opportunity or wait?

Also, when is NVDA's earnings conference call if you know?

Bulls are out of fire power. Looking forward to a slow drip back to $750 then a break below to fill that gap. Don’t fight the magnetic forces lol

Bullishness! (Bull what?)
Just kidding, NVD*/PSQ* did better than NVDA/QQQ

$NVDA has the most amount of bullish premium by far today
By: Cheddar Flow | April 30, 2024

• $NVDA has the most amount of bullish premium by far today



Read Full Story »»»

DiscoverGold

The fact that Ford is a partner of NVDA, could potentially damage NVDA. Ford will look to spread the blame around for the crashes - operator error, faulty chips etc.

Difficult to say how these investigations work out.

Ahh, dont you just love earnings (or not) season?
Old wisdom would say exit before earnings but koolaid stands say long n strong.

Where are the moderators here --- Ignorant and abusive posts diminish an otherwise intelligent message board......NVIDIA......

Well AMD reports tonight it will be hard to know how Nvidia will react kind of a catch 22 to me. If they have low sales of Mi300x the street could say AI is over (which we know isn’t true). Or if great sales the street will say oh it’s over for Nvidia (also not true). We will see what do you guys think

I see that ford is a partner of Nvidia not sure how intense they are on the autonomous driving aspect but cool beans

*TSDD is the anti-tesla, just sold.
NVDA and tesla are koolaid stands to pick off foolish traders.

Valuations are pure crap!

https://blogs.nvidia.com/blog/blackwell-auto-ecosystem-gtc/

It's ok. Tesla share price appears today trying to mimic NVIDIA share habit, hopefully!

That’s okay same question pertains

Posted to wrong board, should be Tesla board

I’m not sure is Ford using Nvidia’s technology

The National Highway Traffic Safety Administration (NHTSA) has launched an investigation into Ford's BlueCruise hands-free driving technology after two fatal crashes involving Mustang Mach-E electric SUVs.

Yes. Thanks.

It looks like some don't know the reporting periods.

People splitting hairs here and making a big deal about nothing.

Ask the chart master. He will have the dates plotted on a map and provide the probability of the dates, with a high degree of accuracy. ;)

Yes they are a month after probably 95% of the companies, I’m not sure why I guess when they started the company