Nvidia is gearing up to announce its earnings post the market close on Wednesday, with Wedbush suggesting a different approach to evaluating this technology stock. In line with other prominent tech narratives, the fixation on P/E ratios could cause investors to overlook significant opportunities.
“Investors need to look beyond the immediate details and focus on the broader picture to anticipate the trajectory of this spending surge (and projections) in the upcoming 3 years,” as stated by analysts.
Drawing a parallel to the transformative tech stocks of the past decade like Amazon, Netflix, Meta, Apple, Alphabet, and other major players, Wedbush emphasizes that investors who rigidly relied on price-to-earnings ratios missed out on substantial gains. This metric holds less relevance when dealing with a distinctive tech narrative.
Rather than fixating on traditional metrics, Wedbush’s optimistic outlook on the AI revolution is supported by the anticipation of a significant surge in expenditure.
“We anticipate that 60%-70% of businesses will eventually adopt AI applications, leading to an estimated additional $1 trillion in AI investments over the next decade.”
Anticipating Nvidia’s upcoming report, analysts project another instance of surpassing expectations, largely attributed to the ongoing upward momentum driven by the necessity for specific chips—GPUs—for AI models, a sector where Nvidia holds a dominant position. Wedbush closely monitors the trend of GPU orders and demand dynamics.
Hence, the key lies in assessing the pace of AI-driven data center spending, with the sector witnessing a substantial influx of funds that is yet to peak.
“We foresee the zenith of expenditure in the AI market as numerous businesses embark on the AI journey in the coming years, and we anticipate positive developments from the pioneer of AI this week.”
Having already surged by 51% this year, Nvidia’s stock valuation surpasses that of the Chinese stock market, positioning it as the third-largest US company.
“The inception of the AI Revolution is synonymous with Nvidia, and we believe that the AI realm is only at its nascent stage,” as highlighted by the analysts.
