- NVIDIA stock continued its strong bull run, reaching its all-time high today.
- The company is still a bargain compared to its top peers.
- A cup-and-handle pattern points to more gains to $260 in the near term.
NVIDIA stock is firing on all cylinders after staging its breakout earlier this month. After bottoming at $164 in March, the stock jumped to a record high of $236 on Thursday, bringing its market capitalization to over $5.7 trillion.
NVIDIA Stock is Still a Bargain
There are signs that NVIDIA stock is a bargain as it nears a $6 trillion market capitalization. Seeking Alpha data shows that the company has a forward price-to-earnings ratio of 23, slightly higher than the S&P 500 Index’s average of 21.
In contrast, the iShares Semiconductor ETF (SOXX), whose top constituents are companies like Micron, AMD, Intel, and Broadcom, has a P/E ratio of nearly 70. Historically, NVIDIA has always traded at a higher valuation than all semiconductor ETFs.
NVIDIA’s cheap valuation is happening at a time when its business is thriving. For one, the US has just allowed ten of the biggest Chinese companies to start buying its H200 chips, a move that will ultimately bring in billions of dollars in revenue.
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NVIDIA to Publish Results Next Week
Analysts also anticipate that its upcoming results will show that its revenues jumped by 80% in the first quarter. This is a strong number for a company that has been around for decades.
Its annual revenue this year is expected to be over $377 billion. With Chinese orders included, there are chances that it will hit the $400 billion milestone this year. In a recent statement, Jensen Huang, its CEO, noted that the company will sell products worth over $1 trillion through 2027.
Notably, NVIDIA has one of the biggest profit margins in the hardware industry. It has a net profit margin of 54%, making it highly profitable, a trend that will continue as chip prices jump.
This explains why it has invested billions of dollars in other companies. Some of its recent investments are companies like Intel, Lumentum, CoreWeave, Nebius, IREN, OpenAI, and Anthropic. Most of its investments have soared in the past few months, with companies like Nebius and Intel sitting at their all-time highs.
NVIDIA is also seeking to expand in other areas. For example, the management revealed plans to enter the AI CPU industry that is seeing robust demand this year. Just recently, Intel stock soared after reporting strong results, with its CPU recording strong demand.
In a Pole Position to Beat Competition
A key risk facing NVIDIA is that competition continues to rise in the GPU industry. Most of this competition is coming from AMD, a company whose market share continues to rise. It is also coming from companies like Samsung and fast-growing Chinese startups.
At the same time, its biggest customers like Microsoft, Google, and Amazon are working on their ASIC chips. In theory, this should be a big blow to NVIDIA as it means that a customer like Microsoft, which accounts for about 20% of its revenue, will start using its in-house chips.
Still, NVIDIA is in a pole position, with its technology being much further than other firms. Also, it will take time for these ASIC chips to come online and gain market share.
NVIDIA Share Price Technical Analysis
Technical analysis can help us identify potential price targets for an asset. In this case, a closer look shows that the NVDA stock price has formed a cup-and-handle pattern with a depth of about 23%.
Measuring the same distance from the cup’s upper side gives the price target at $260, a move that would bring its market cap to over $6.30 trillion.
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