Nvidia Corporation (NVDA) experienced a significant surge in its stock price, reaching a record high of over $514 per share. This remarkable increase, amounting to over 4%, came on the heels of Nvidia’s participation in the CES event and its strategic business dealings with China. Since hitting its recent low point on October 26th, 2023, Nvidia’s stock has soared by 27%, significantly outperforming the S&P 500’s 14% growth during the same period.
Jim Cramer’s perspective
CNBC’s financial expert, Jim Cramer, weighed in on Nvidia’s recent success, stating, “I think the company still is very undervalued.” Despite Nvidia’s stock value more than tripling in the past year, Cramer maintains a bullish outlook on the company’s prospects. This sentiment is in stark contrast to the FactSet data, which indicates that Nvidia currently trades at approximately 24 times forward earnings, compared to its five-year average of 39.
Cramer’s unwavering faith in Nvidia is not new. He has consistently expressed confidence in the company even when faced with competitive threats and market rumors. For instance, when rumors circulated about Microsoft Corp challenging Nvidia with its own AI chip, Cramer reiterated his positive stance on Nvidia. Even after Microsoft launched its in-house AI chips, Cramer maintained that Microsoft couldn’t effectively compete with Nvidia.
Nvidia’s strategic moves
Nvidia’s recent success can be attributed to several strategic moves by the company. One significant development is Nvidia’s commitment to initiating mass production of AI chips tailored for Chinese customers, aligning with the U.S. government’s revised export rules on AI technology. This move reflects Nvidia’s adaptability and willingness to navigate complex regulatory environments.
However, it is worth noting that Chinese tech giants such as Alibaba Group Holding Ltd (BABA) and Tencent Holdings Ltd (TCEHY) are planning to reduce their orders for Nvidia chips in 2024. They seem to be favoring Chinese firms and their custom processors. Nonetheless, Cramer downplayed the potential impact of this shift, emphasizing the superiority of Nvidia’s data center chips.
Furthermore, Nvidia made headlines at the CES conference by unveiling new GPUs designed for personal computers and professional workstations. These GPUs are specifically designed to “unlock the full potential of generative AI on PCs,” reflecting Nvidia’s commitment to advancing AI technology across various sectors.
Nvidia’s valuation has been a point of discussion, given its recent stock price surge. As mentioned earlier, the company currently trades at around 24 times forward earnings, which is notably lower than its five-year average of 39. This raises questions about whether Nvidia is indeed undervalued or if its current stock price reflects its true worth.
It is essential to consider that Nvidia’s rapid growth and strong performance in the AI chip industry have attracted significant investor interest. The company’s stock price has risen by a staggering 239% in 2023, which is a testament to its market dominance. Investors are keenly watching how Nvidia continues to navigate the competitive landscape and leverage its technological advancements.
Nvidia Corporation has achieved a record-high stock price, driven by its participation in the CES event and strategic business dealings with China. CNBC’s Jim Cramer remains optimistic about Nvidia’s future, despite concerns about its current valuation. The company’s ability to adapt to changing market dynamics and maintain a competitive edge in the AI chip industry is evident in its recent moves.
Nvidia’s decision to produce AI chips for Chinese customers and the unveiling of new GPUs for personal computers and workstations highlight its commitment to innovation. However, the company faces challenges as Chinese tech giants reduce their orders for Nvidia chips in favor of custom solutions. Nonetheless, Cramer’s confidence in Nvidia remains steadfast, reflecting the company’s strong position in the market.
As Nvidia continues to shape the future of AI technology, investors and industry observers will closely monitor its performance and strategic decisions in the dynamic landscape of semiconductor innovation.