Shares of Nvidia (NVDA -0.14%) are up about 230% year over year after a seemingly unstoppable bull run. The company's business exploded last year as its chips became the preferred hardware for artificial intelligence (AI) developers everywhere.
And the company isn't done yet.
Nvidia's stock has risen more than 15% since the start of 2024, suggesting it still has much to offer investors in the new year. The company's dominance in AI is unmatched, and is unlikely to dissipate anytime soon. Meanwhile, improvements in the PC market could offer gradual boosts to revenue over the next 12 months.
Nvidia is on a promising growth trajectory. As a result, there's no better time to learn more about this chipmaker and consider investing in its business. Here are three reasons to buy Nvidia stock in 2024.
1. Nvidia is unlikely to lose its AI crown any time soon
Nvidia snapped up an estimated 90% market share in AI chips in 2023. The company's years of dominance in graphics processing units (GPUs) allowed it to get a head start in AI as rivals like AMD and Intel scrambled to catch up. However, competition in the segment is expected to heat up this year.
AMD and Intel both announced a range of new AI chips that will begin shipping in 2024. Meanwhile, tech behemoths Amazon, Microsoft, and Alphabet have plans to venture into the market soon. Some analysts have expressed concerns for Nvidia's business as newcomers enter the industry. However, history suggests the company won't have much trouble retaining its supremacy in AI chips.
Nvidia has held an over-80% market share in desktop GPUs for years despite AMD's and Intel's presence in the sector. Intel only joined the industry last year, while AMD's history in desktop GPUs spans decades. Still, AMD's chips only represent about 10% of the market, suggesting even tech titans like Amazon and Microsoft could struggle to steal significant share from Nvidia in AI.
Moreover, according to Grand View Research, the AI market is projected to expand at a compound annual growth rate of 37% through 2030. That trajectory would see the segment exceed $1 trillion before the end of the decade, indicating there will be plenty of room for Nvidia to retain its spot at the top and welcome competitors.
2. Improvements in the PC market
Macroeconomic headwinds brought steep declines in the PC market in 2022 and for much of last year. Spikes in inflation led to reduced consumer spending, with PC shipments tumbling 16% year over year in 2022 and continuing to fall in the first three quarters of 2023. However, a recovery finally seems to be underway, and Nvidia is already profiting from market improvements.
PC shipments increased by 0.3% in Q4 2023. Meanwhile, Nvidia's gaming segment (which includes PC component sales) reported revenue growth of 81% in its latest quarter.
Nvidia could be in for another stellar growth year as it continues to flourish in AI and PC sales improve.
3. EPS estimates suggest massive upside
Nvidia's meteoric rise over the last year has made its stock seem expensive, as its forward price-to-earnings ratio (P/E) topped 47. A forward P/E of 20 and below often indicates a stock is trading at a value, with the chipmaker well above that.
However, EPS estimates tell a different story, and show why Nvidia's stock might be worth the high price tag.
Data by YCharts
This chart shows Nvidia's earnings could hit nearly $24 per share by fiscal 2026. That figure, multiplied by its forward P/E of 47, implies a potential stock price of $1,128 per share. If projections are correct, Nvidia's stock would rise 97% over the next two fiscal years. It's a lofty target, but based on reasonable financial forecasts.
Alongside a leading position in AI and a recovering PC business, Nvidia's stock is a screaming buy at the start of 2024.
