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Nvidia shares go under the BridgeWise AI analysis microscope

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Hailed in some quarters as a “hold my beer” moment in the tech sector, the Q1 results for Nvidia NASDAQ:NVDA certainly took the breath away and saw a deserved rally in the stock price.

Tipped by CFD broker Atlantic Capital Markets back in March as THE go to stock for exposure to the upcoming AI revolution, Nvidia had been trending as a meme stock on Reddit weeks before the results. This time the punters got it right.

The boom in demand for AI tech has put Nvidia on a trajectory to become the world’s first trillion-dollar chip company. Nvidia is THE main source of chips behind chatbots like ChatGPT and has positioned itself at the eye of the AI storm.

“This is proving highly lucrative, but isn’t without risk,” said Hargreaves Lansdown in a cautionary note last week. “Investors are clearly very excited and much of this may be warranted, but over-excitement can lead to oversight of fundamentals becoming blurry and increases the risk of volatility down the road.”

Nvidia numbers beat predictions

Nvidia’s revenue numbers beat analyst predictions across all its divisions, and followed that up with a major Q2 revenue forecast of $11bn. We thought it might be interesting to run Nvidia through the artificial intelligence engines at BridgeWise to see what the AI there makes of the stock and whether the current valuation is justified.

In terms of the fundamentals, Nividia stock measures up well against its peers. It achieves a Hold rating from BridgeWise, which the AI there feels is what most investors can expect from the sector at the moment. The company does seem to be scoring a little better than the peers average however.

Among the better scoring Nvidia factors are cash & equivalents and book value factors, and the price to book ratio of 39.2 represents an 84% change from the previous report. These are industry leading book value factors which could help to establish further positive momentum for the stock going forward.

Revenue efficiency also looks encouraging and is particularly influential for stock price performance in this sector. Nvidia looks like it is heading in the right direction in terms of EBITDA, exhibiting efficient capital controls and strong overall financial performance. BridgeWise flagged up return factors – e.g. return on equity – as one possible area of concern.

Cash flow numbers look very positive and Nvidia measures up very well against peers in this area. Asset turnover metrics were surprisingly weak for a tech stock of this size however.

Share price trading at an all time high

Shares in Nvidia are now trading at an all time high, much higher than the $329 achieved in November 2021. Note that after that peak the market sold the stock down into a trench, where it hit $112 in October 2022. That was 12 months of a loss making position for stockholders. This time around you have the enthusiasm around AI, sparked by the introduction of ChatGPT, but will it last? And is the valuation justified with the PE at a thumping 201x?

If you’re interested in getting access to cutting-edge AI-driven stock analytics, you can do so right now through The Armchair Trader.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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