Nvidia (NASDAQ:(NVDA) and Microsoft have capitalized on the AI market, leading to significant growth for Nvidia stock.
Their early involvement in AI, particularly with Nvidia’s hardware and Microsoft’s investment in OpenAI, positions them as appealing investment options.
However, among the two, Nvidia has seen remarkable growth as an AI stock. Aside from its high valuation that raises concerns about sustainability, it’s still a buy.
While it is a leader in GPUs for gaming, data centers, and AI, the price is notably inflated. Competition and uncertain financials add further caution to investing in Nvidia. Here’s why investing in Nvidia right now may be too risky.
Nvidia Has Broken Into the Trillion Dollar Club
Nvidia has joined the prestigious trillion-dollar club with an impressive surge in market cap fueled by strong Q1 results.
With the stock hitting new 52-week highs and showing no signs of slowing down, NVDA has gained over 200% year to date, currently trading at $412 per share. This translates into a market capitalization of a little more than $1 trillion.
Nvidia has transitioned from gaming to becoming a key player in the AI industry. With its cutting-edge technology, it has the potential to revolutionize gaming. The recent introduction of the Avatar Cloud Engine showcases Nvidia’s AI capabilities for game developers.
Alongside its data center business, the gaming segment is expected to drive significant revenue growth. Nvidia’s position in the industry is strengthening, and it is well-positioned to capitalize on the AI boom with its in-demand chips.
The company’s cloud business has also demonstrated remarkable growth, solidifying its market presence. As a result, Nvidia stands out as one of the top tech stocks to monitor.
Strong Growth Driven By AI
Nvidia stands out as the leading provider of GPUs to ChatGPT, with projections of increasing GPU usage as the platform expands commercially. The company is already benefiting from this growth, clear from its AI-focused data center segment reporting a 41% year-over-year revenue increase in fiscal 2022.
Nvidia’s dominance in the GPU market is unparalleled, with its gaming division posting impressive profits even during economic challenges. The AI frenzy is now propelling NVDA stock to remarkable heights, despite concerns about its valuation.
However, Nvidia’s immense potential cannot be overlooked, especially considering its role in powering ChatGPT with its chips. This makes it an enticing investment opportunity for those interested in the thriving AI industry.
What Now?
Nvidia stock is gaining momentum following its collaboration with Snowflake (NYSE: SNOW) to develop personalized AI models. This partnership empowers Snowflake’s extensive customer base of over 8,000 to create custom generative AI assistants, utilizing their vast data resources.
Nvidia’s contribution includes the NeMO toolkit and infrastructure such as graphics cards for AI training. Snowflake gains the advantage of offering tailored chatbots capable of addressing specific business inquiries for its customers.
Nvidia secures another victory in the booming AI market, strengthening its leadership among growing AI stocks. This deal solidifies NVDA’s position in the industry, as traders and analysts expect significant advancements and widespread adoption of AI technology in the future.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.