- On a forward PE basis, Nvidia is on a shorter valuation than a year ago
- Our other company this week is also looking to exploit favourable end markets
Undoubtedly the glamour stock of 2023, Nvidia’s continues to lead the artificial intelligence investing boom. Thanks to its leadership in crucial chips and some smart partnerships, it still looks decent value on a forward-looking basis.
Not so long ago, Nvidia (US:NVDA) was best known as a graphics company. Its video cards have enabled the fantastic graphics and images experienced by gamers on PCs and gaming consoles.
Today, Nvidia is one of the world’s most valuable companies due to its emergence as a semiconductor superpower. Its chips are powering the phenomenal growth in artificial intelligence (AI) investment by the world’s leading technology and software companies.
If you are a regular follower of the US stock market, you could be forgiven for thinking that investors have become obsessed with AI and are pricing many companies as sure fire winners from the technology – a bit like internet related stocks in the late 1990s and early 2000s.
The biggest winner from this enthusiasm has been Nvidia whose shares have returned 226 per cent since the start of 2023. Most of these gains came in the first half of the year. Since then, the performance of the shares has been more subdued as investors rightly ask whether they can continue to keep on going up.
When the share price of a company has made big gains in a short period of time, it’s only natural to think that they might fall back or pause for breath. However, when it comes to Nvidia there are good grounds for thinking that its shares continue to look attractive for those investors with a long-term view.
Our other company this week has great exposure to some attractive end markets, but its capital structure choices could drag on future upside for shareholders.
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