SAN FRANCISCO – Nvidia Corp. is in the midst of a stock rally, making it a potential threat to overtake Amazon.com Inc. and become the fourth most valuable company in the United States.
The company’s stock has risen by over 40% in 2024 alone, leading to its valuation of $1.72 trillion, just shy of Amazon at $1.76 trillion. This surge has been driven by strong demand for its chips used in artificial intelligence computing, but questions about the sustainability of these gains have arisen.
Investors such as Michael Cuggino, president at Permanent Portfolio Family of Funds, have responded to the rapid increase in stock value by selling some Nvidia shares, considering the stock to be overvalued.
Despite the company’s strong financial performance, concerns have been raised about the steep rise in its valuation. The stock’s price to estimated profits has increased to 33 times, prompting discussions about the sustainability of its growth. However, the stock remains the top-performing component of the Nasdaq 100 Index, largely due to its significant jump in sales and profits driven by AI-related demand.
While Wall Street has shown confidence in the company’s profit growth, concerns linger about the stock’s valuation and the potential for further gains.
Bulls, on the other hand, believe that the fundamentals support the stock’s continued upward trajectory. They point to a bullish forecast from Arm Holdings Plc and Nvidia’s strong financial reports as evidence of the company’s long-term potential for growth.
Despite the concerns about its valuation, some investors, like Gus Zinn, senior portfolio manager at Macquarie Asset Management, see Nvidia’s rally as having more room to run, believing that the company’s growth will continue for a longer period than anticipated.
The sustainability of Nvidia’s stock rally continues to be a topic of debate among investors and analysts, with differing views on whether the stock’s valuation is justified and if the company’s growth trajectory will be sustained in the long term.