Despite experiencing a significant increase, the pioneer in artificial intelligence (AI) technology, Nvidia, may still have potential for further growth.
Nvidia’s stock, listed under the ticker NVDA, has shown a strong performance at the beginning of October. Following a challenging period over the summer, characterized by a decline of up to 27% due to concerns about high valuation and the current state of AI adoption, the company has started to recover. Nvidia has experienced a rally, rising more than 29% over approximately four weeks, and continued this upward trend with an additional gain of as much as 4.5% today, closing 4.1% higher by the end of the trading session.
This significant rally has prompted investors to question whether the stock remains a good buying opportunity.
### Bullish Indicators Present
Since the start of the previous year, Nvidia’s stock has undergone a significant rally, with an increase exceeding 800%. The emergence of AI has driven a surge in demand for Nvidia’s graphics processing units (GPUs), essential for processing AI data due to their substantial computational power. This demand has been reflected in Nvidia’s performance, with five consecutive quarters of triple-digit, year-over-year growth in sales and profits. Nonetheless, when the company projected revenue growth of 80%, some investors became concerned and withdrew, which could have been a misjudgment.
In recent remarks, CEO Jensen Huang highlighted the intense demand for Nvidia’s upcoming Blackwell AI architecture, describing it as “insane,” and noting that everyone wants to have the most and be the first. This stands in contrast to recent worries that AI demand had reached its peak.
Wall Street remains optimistic about Nvidia, with Cantor Fitzgerald analyst C.J. Muse exemplifying the confidence among analysts. Muse pointed out that Nvidia offers “the best upside consensus” among stocks he follows, dubbing it his “far and away our Top Pick.”
### Understanding the Broader Perspective
A significant concern for investors has been Nvidia’s high valuation, which is currently 62 times earnings. However, for Nvidia’s 2026 fiscal year, starting in January, Wall Street anticipates earnings per share of $4.02. Based on the current share price of around $133, this translates to about 33 times forward earnings, only slightly above the S&P 500’s multiple of 30.
This valuation presents an appealing opportunity for a company with numerous potential paths to success.