Why Should Investors be Extremely Conscious Investing In Nvidia at 3 Trillion?

Nvidia was founded in 1993 by Jensen Huang, Chris Malachowsky, and Curtis Priem. Jensen Huang, previously at LSI Logic and AMD, led Nvidia to prominence. The company’s first product, the NV1, debuted in 1995, followed by the RIVA series. In 1999, Nvidia launched the revolutionary GeForce 256, pioneering the GPU industry. The GeForce series became synonymous with gaming excellence, while the Quadro line catered to professionals. Nvidia’s CUDA platform, introduced in 2006, enabled parallel computing advancements. The company’s GPUs now power AI, data centres, and autonomous vehicles, cementing Nvidia’s role as a technology innovator and industry leader.

  • Financial History 
  1. History of stock  Nvidia went public on January 22, 1999, with an initial offering price of $12 per share. The stock saw steady growth, driven by the success of its GeForce GPUs. A major surge occurred in the mid-2010s as Nvidia capitalised on the AI and data centre markets. The stock split four times, most recently in 2021, reflecting strong performance.

Nvidia’s stock price surged between 2023 and 2024, reaching a market cap of $3 trillion by June 2024. This spike was fueled by strong demand in AI technologies, data centres, and advancements in GPU innovations.

  1. History of revenue 

Since its IPO in 1999, Nvidia has seen substantial revenue and profit growth, driven by its GPU innovations. Revenues soared from $78 million in 1999 to over $27 billion in 2023. Profits followed, especially with the rise of AI and data center markets. By 2024, Nvidia’s financial performance reached new heights, solidifying its status as a tech giant with robust earnings and a strong market presence.

  1. P.E ratio performance 

In 2023, Nvidia’s price-to-earnings (P/E) ratio reflected strong investor confidence, averaging around 50-60 due to booming AI and data center demand. By the first quarter of 2024, this P/E ratio climbed further, reaching approximately 70, as Nvidia’s market valuation soared to unprecedented levels, driven by continued robust earnings growth and market expansion.

Keeping in view the extremely high level of P.E ratio of 70 percent it very important to calculate for investor that how much time it could take to reach the P.E ratio of s&p 500 keeping in view it’s growth potential and it’s financial standing.

The potential time it could take to reach the current level of P.E ratio if it kept Growing at the rate of 40 % annually 

It’s profits are $5.4 billions based on the report of financial Year 2023. And it’s market value is 3 Trillion.

We calculated the time based on this number.

Assuming Nvidia continues growing at 40% annually, it would take approximately 9.6 years to reach a P/E ratio of 22 with a market cap of $3 trillion and profits of $5.4 billion.

  • Reason to be worried 
  1. Why High level of P.E ratio is Dangerous.

Investors should exercise caution when considering Nvidia at a $3 trillion market cap, as the market tends to reconcile PE ratios with future expectations. While Nvidia’s growth potential is significant, such a valuation demands sustained high performance and innovation. Evaluating the balance between current earnings, growth projections, and market sentiment is crucial to making informed investment decisions in a rapidly evolving and dynamic market environment.

  1. Rising competition  Chinese companies, such as Huawei and Tencent, compete fiercely with Nvidia in the semiconductor and AI sectors. While Nvidia leads in GPU technology, Chinese firms invest heavily in R&D, aiming to narrow the gap. Government backing and access to a vast market further intensify competition, shaping the future of tech innovation.
  • Conclusion 

Successful investors understand that risk is inherent in investing but manage it effectively through diversification, research, and disciplined decision-making. By carefully assessing potential risks and implementing strategies to mitigate them, they position themselves for long-term success in the unpredictable world of financial markets.

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