The launch of ChatGPT on November 30, 2022 was a momentous occasion – it brought some of the possibilities that artificial intelligence holds into the public consciousness, and helped launch the stock price of the leading company involved in those efforts, Nvidia (NVDA), into the stratosphere. NVDA has soared by more than 750% since then, while the S&P 500 Index is up a mere 42%. On Tuesday, NVDA achieved its latest and most notable milestone when it edged out both Apple and Microsoft to become the most valuable company in the world, worth more than $3.3 trillion! A year ago, NVDA was worth “only” around $1 trillion.
There is certainly plenty of hype behind all things AI-related at this point, but so far NVDA has been backing it up with tremendous growth. For example, in 2022, NVDA’s full year revenues were $26.9 billion, so they were already doing quite well as a business. However, as the demand for the high-end processing chips and software that they make began to take off, the growth over the past several quarters has been almost inconceivable – NVDA just delivered revenue of $26 billion in the first quarter of this year! This has driven their earnings-per-share from $6 to nearly $28 (pre-stock split) in less than two years, an almost 5x increase.
Whether or not NVDA is a good investment from here is of course an ongoing debate among investors. While they are clearly well positioned to benefit from the fledgling AI-revolution that many believe is just getting started, it will be difficult to replicate the explosive growth of the past several quarters, meaning that there could be some disappointment relative to astronomical expectations at some point. It will be interesting to see how it all plays out, but sometimes it’s worth stepping back to simply admire what has transpired.
Source: Bloomberg, as of 6/18/24
Source: Yardeni Research, as of 5/22/24
Carl Noble, CFA®
Senior Vice President of Investments
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