Nvidia: Is the Price Unrealistic?

Nvidia (NASDAQ:NVDA), is the price unrealistic?
 
Over the past 2 years, the shares of Nvidia Corporation ( NASDAQ: NVDA ) have soared despite deteriorating fundamentals.
 
The use of artificial intelligence is becoming more widespread among large companies such as Google (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and AT&T (NYSE:T).
 
Their latest earnings calls indicate that they are starting to use generative AI in their products and services.
 
This is just a preview of what to expect in the near future.
 
We are witnessing the creation of a new speculative bubble, that of AI.
 
NVDA's value does not depend on its fundamentals, but rather on its future prospects.
 
After the semiconductor giant released better-than-expected first-quarter results, shares soared 20%, erasing any pessimism about future performance.
 
But from my data analysis, I notice that the profit growth rate has decreased and another question mark concerns the price/revenue ratio.
 
This ratio is one of the best indicators for assessing the health of a business, and generally, well-managed businesses have a ratio of between 2 and 4.
 
This figure shows whether the company is making profits and is a great way to measure a company's profitability.
 
Here we have an incredibly high price-to-sales ratio of 28 making Nvidia Corporation stock one of the most expensive in the history of the market.
 
The market is booming and we know that in the short run markets can be irrational.
 
We expect AI to bring big business, as can be seen from the growth in financials.
 
In the first quarter of fiscal 2024, Nvidia's data center revenues reached a record $4.28 billion (+14% annually and +18% quarterly) due to strong interest in using the GPU Hopper and amperometric architectures for generative AI automation and advanced language models.
 
The predictions are truly amazing.


 
Nvidia expects record revenue of $11 billion in the second quarter, well above the initial estimate of $7 billion.
 
This projection indicates a 64% annualized sales increase for the company in the coming quarter.
 
Nvidia Corporation is an incredible company with exceptional quality products and led by an innovative CEO in the semiconductor industry.
 
However, the $380 price that investors have to pay for Nvidia stock is too high.
 
Given the current circumstances, with the Fed continuing to reduce liquidity in the financial markets and the bank credit tightening cycle continuing, it is not advisable to take risks by purchasing such expensive stocks.
 
According to my calculations, the stock is worth $230.
 
The financial bubble in the US market is slowly coming to an end and I think this value should be taken into consideration in the coming months.

 
Disclaimer: The information and content provided on this site should not be considered as an invitation to invest in the financial markets. The Content is a personal opinion of Dr. Antonio Ferlito.