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Try to dethrone this king.
In the days since Nvidia’s (NVDA) big quarter and guidance on Wednesday evening, two tracks have emerged.
Track one is owned and operated by Wall Street, and the company believes Nvidia will continue to reach new profit highs this year and next. The consensus estimates (which you can follow here on Yahoo Finance) are rising (again), and the Street remains steadfast in its appetite for higher price targets.
The other track is owned and operated by the media, and is increasingly trying to poke holes in Nvidia’s investment thesis. Hey, I get it; it is our job to be skeptical of numbers, accepted narratives and leaders.
But to argue that Nvidia stock is in a bubble because it’s up a lot, or that its financials are in a bubble because of eye-popping growth numbers, seems completely off base to me.
Let me say this up front: I have no car in this race – I do not own Nvidia stock and never have.
All I’m saying is that an asset bubble has a few simple characteristics.
One, the asset that appreciates generally does not have the fundamentals to justify this appreciation. Two, people blindly buy the asset without understanding it – mainly because everyone else goes along with it.
I don’t see any of these things for Nvidia.
Investors seem very well informed about Nvidia’s business and are buying for the right reasons.
Next, Nvidia’s growth figures justify a higher valuation. This is a company that grew profits by 461% in the first quarter! Sales exploded by 262%!
Why? Because we are witnessing a seismic shift in the tech stacks thanks to generative AI, powered by models powered by Nvidia chips. No one is even close to this company’s technology. The concerns about Amazon (AMZN) and Apple (AAPL) building their own AI chips are great to discuss, but Nvidia is doing this at scale and is 43 miles ahead of these companies.
“People want to deploy these data centers now,” Nvidia CEO Jensen Huang told Yahoo Finance’s Julie Hyman and Dan Howley in an exclusive interview immediately after the earnings report (video above). ‘They want ours [graphics processing units] to work now and start earning money and saving money. And so that demand is just so strong.”
Will Nvidia continue to grow its revenue and revenue by triple digits? No, but growth rates will remain impressive and faster than the competition.
Bubble? Let’s get real, people!
Amazon AWS has started making AI chips to better control a supply chain hungry for these powerful pieces of technology. AWS CEO Adam Selipsky discusses the strategy in a new episode of the Opening Bid podcast. Listen in below.
Brian Sozzi is editor-in-chief of Yahoo Finance. He is also the host of the “Starting bid” podcast. Follow Sozzi on Twitter/X @BrianSozzi and further LinkedIn. Tips about deals, mergers, activist situations or something else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to join Yahoo Finance Live? Email Brian Sozzi.
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