Isn’t Nvidia (NASDAQ:NVDA) Stock Overvalued? Not Quite

Nvidia (NASDAQ:NVDA) has been one of the best-performing stocks globally over the past 18 months. The chip manufacturer’s shares are up nearly 7x over the period. This extraordinary growth can certainly turn some investors off, making them believe it’s overvalued. However, it’s worth remembering that momentum can actually be one of the best indicators of forward stock performance, especially if the company has a track record of beating expectations.

Personally, I remain bullish on NVDA stock, not just because of momentum but because the company is so central to the AI revolution, which has only just begun.

The AI Kingpin

Nvidia, as a company, is at the very heart of the AI revolution due to its graphics processing units (GPUs), which possess the capabilities required for huge AI and large language models. The units were originally built for the gaming sector, but GPUs are also perfect for AI’s massive data processing needs.

Unlike central processing units (CPUs) that handle tasks one by one, GPUs excel at parallel processing, allowing them to take on multiple tasks simultaneously. Without this technology, the step forward we’ve seen in AI, which includes developments in facial recognition technology and self-driving cars, wouldn’t be possible.

Nvidia’s dominance stems from the architecture of its GPU. Unlike CPUs with a few cores, Nvidia packs a massive number of cores onto a single chip. In turn, this allows for high processing power within a smaller space, and this is hugely important for efficient AI processing. Moreover, Nvidia has focused on high-bandwidth memory, which allows these cores to access data rapidly, further accelerating AI computations. As such, Nvidia has earned a significant edge in the AI hardware race.

However, in the AI world, it’s not just about hardware. Nvidia’s CUDA software provides direct access to the GPU’s virtual instructions. This software ecosystem empowers developers to build and refine AI projects and has made Nvidia a one-stop shop for all things AI.

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Isn’t Nvidia Really Expensive?

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