Many investors find it difficult to buy into a stock after it has already made a big run higher. Nvidia (NVDA +1.67%) certainly fits into that category. Its shares have soared by an astounding 515% just since the start of 2023.
That's because its data center business has exploded with the onset and growth of artificial intelligence (AI). Generative AI applications continue to roll out, and Nvidia is the leading supplier of platforms for the high-performance computing power it requires.
Nvidia's sales explode
Nvidia's stock thundered higher as revenue in its data center segment mushroomed. The segment generated $18.4 billion in revenue for Nvidia's fiscal 2024 fourth quarter ended Jan. 28. That compares to $15 billion from that business segment for the entire fiscal year 2023. So it shouldn't be a surprise that the company's stock price also took off.
NASDAQ: NVDA
Key Data Points
That monumental increase in share price has some investors wondering whether they missed out, and is it too late to buy Nvidia stock. But those sales also translated into profits. Diluted earnings per share (EPS) in the most recently reported quarter soared by 765% year over year. And there are good reasons to believe more is to come.
Beyond the "Magnificent Seven"
Nvidia's chips have been in such high demand across so many industries and geographies that the company has had to prioritize certain customers. The high-growth technology stocks with the deepest pockets -- part of the group dubbed the "Magnificent Seven" -- have been at the front of the line. The chart below shows the tech companies that spent the most to buy Nvidia's H100 graphics processing units (GPUs) last year.
Image source: Statista.
But uses for AI are growing, and the technology is still in its early stages. At Nvidia's GTC (GPU Technology Conference) last month, CEO Jensen Huang said the first accomplishment has been to "close the technology divide," allowing the average person to use the technology. The next accomplishment will likely entail broadening the supply to more buyers for more industry uses.
Next-generation AI technology
That same conference is where Nvidia introduced its latest AI technology. Its new Blackwell AI platform is expected to be used by automakers, for advanced data center and cloud infrastructure, and other generative-AI supercomputing needs. So buyers of Nvidia stock now will see more sales to a growing list of customers.
And as for missing out on the stock's big run, just look at how its valuation has changed with the burst of sales and increasing profits. Even as the stock has jumped more than 500%, its forward price-to-earnings (P/E) ratio has dropped.
That downward valuation trend for Nvidia stock is bound to continue as its financial results continue to surprise investors to the upside. It is the leader in a rapidly growing space. It seems clear the demand is there.
In this situation, investors shouldn't think they have missed out on the gains. Nvidia stock might not return another 500% in the next 18 months. But a few years from now, it's likely to still be a valuable holding in any portfolio.
