Cathy Wood said NVDA stock price is ahead of the curve and is trading at 25X expected revenue for this year.
ark investmentCathy Wood, known for making bold bets on new-age tech companies, justifies her exit NVIDIA (NASDAQ:NVDA) earlier this year. Last Wednesday, May 24, NVDA stock jumped more than 20% in a single day to near the $400 level. In his tweet on Monday, May 29, the ARK Innovation ETF (ticker ARKK) manager justified his exit from the stock. Wood said the world’s most valuable chipmaker has been priced “ahead of the curve”.
Earlier this year in January 2023, ARKK Fund exited Nvidia, after which the stock has more than doubled and is close to hitting a $1 trillion valuation. However, Wood noted that NVDA stock is trading at 25 times estimated sales for the current fiscal year as investor enthusiasm grows over Nvidia’s push into the AI industry. In comparison, it trades at 12 times that of its peers on the Philadelphia Semiconductor Index as well as Microsoft Corp.
However, we see, NVDA stock is trading at premium since the pandemic. But after the sharp jump in prices this year, the gap has become even more stark. On the other hand, some analysts also believe that the outlook for the chips is not yet upbeat amid weak demand for consumer electronics.
“Nvidia’s recent results have raised hopes for AI servers,” said SMBC Nikko Securities Inc. analysts, including Takeru Hanaya. wrote in a note. Still, there is “a gap between AI expectations and overall market weakness,” as demonstrated by inventory adjustments and ongoing price cuts in the chip industry.
Nvidia’s push into the AI space
Jensen Huang, who co-founded Nvidia in 1993, is still running the company. Over the years, Nvidia has made a name for itself for being the leading chip manufacturer, catering to various industrial requirements ranging from gaming, cloud computing, etc.
On Monday, May 29, at the Computex trade show, Huang unveiled a range of AI products in new robotics design, gaming capabilities, advertising services and networking technology. In addition, Huang also unveiled Nvidia’s AI supercomputer platform DGX GH200 Which will help tech companies to create a successor to the popular platform ChatGPT. In a note to investors, independent analyst William Keating wrote:
“We fundamentally feel that Nvidia’s stock is in bubble territory, despite potential future growth. In other words, we think the train has left the station and we’re too inclined to follow it down the tunnel at this stage.” Let’s see the low point.
Based on how much cash Nvidia generates, the company is far more expensive than its peers. Nvidia’s cash flow valuation is more than 140 times, surpassing its peers Advanced Micro Devices Inc. and Monolithic Power Systems Inc., which trade less than half of Nvidia’s cash flow.
Bhushan is a FinTech enthusiast and has a great understanding of the financial markets. His interest in economics and finance drew his attention to the newly emerging blockchain technology and cryptocurrency markets. He is in the process of continuous learning and keeps motivating himself by sharing his acquired knowledge. In his spare time he reads thriller fiction novels and occasionally explores his culinary skills.
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