Nvidia stock is up 150% in 2024. History says the AI ​​stock will do so in the second half of the year (hint: it might shock you).

Nvidia (Nasdaq: NVDA) The company dominates the market for graphics processing units (GPUs) in data centers, chips used to accelerate demanding workloads like artificial intelligence (AI) applications. The Wall Street Journal “Nvidia chips support all of the most advanced AI systems, giving the company an estimated market share of more than 80%,” it recently reported.

The company has been gaining momentum since launching ChatGPT in November 2022. This event catapulted generative AI into the spotlight and inspired unprecedented demand for AI hardware. Nvidia shares are up 150% this year alone, accounting for nearly a third of the gains in Standard & Poor’s 500.

Somewhat surprisingly, history says Nvidia shareholders could make more money in the second half of 2024, even after triple-digit gains in the first half of the year. Read on to find out more.

History says that Nvidia could continue to rise in the second half of 2024

Nvidia became a public company in 1999. The chart below shows that its stock price has risen (or fallen) in the first and second halves of each full year since its initial public offering (IPO). Nvidia performed better overall in the second half of the year, as evidenced by the average values ​​listed at the bottom of each column.

Data source: YCharts.

Past performance is no guarantee of future results, but we can use the information in the chart to make educated guesses about Nvidia’s performance in the remaining months of 2024.

First, Nvidia rarely follows an upbeat first half with a downbeat second half. Specifically, the stock has had a positive first half return in 18 years and a positive second half return in 16 of those 18 years, or 89% of the time. In other words, history suggests that Nvidia shareholders are likely to make money in the remaining months of 2024.

Second, Nvidia generated an average return of 36% during the second half of the year, more than double its average return in the first half. However, when gains exceeded 100% in the first half of the year, the stock returned an average of 17% in the second half. So history suggests that Nvidia shareholders could see a 17% return on their investment in the remaining months of 2024.

Unfortunately, analyzing Nvidia’s stock price rise in the past is a poor way to predict the future. It ignores consequential variables such as current financial results, valuation, and market sentiment. But Wall Street analysts took these variables into account and did not take a good view.

Wall Street analysts see very little upside for Nvidia shareholders

Of the 60 analysts who follow Nvidia, 90% rate the stock as a buy and 10% rate it as a hold. No one is currently recommending selling. However, the average 12-month price target of $127.50 per share implies an upside of only 3% from its current price of $124 per share.

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Analysts have consistently revised their targets higher as Nvidia has crushed revenue and earnings estimates. But a company can only beat estimates so many times before the market expects that outcome – and we may have already reached that point. Nvidia has beat revenue and earnings estimates by at least 6% and 10%, respectively, in four straight quarters.

This is particularly impressive, given these revenues and Non-GAAP Net income rose at a triple-digit pace in those quarters, as shown in the chart below.

Chart showing Nvidia's revenue and non-GAAP net income over the past five quarters.

Nvidia’s revenue and non-GAAP net income have increased at a triple-digit pace for four straight quarters. (Note: The first quarter of fiscal 2025 ended in April 2024.)

Here’s the bottom line: At some point, investors will be disappointed when Nvidia reports its financial results either because revenue and/or earnings beat estimates too modestly or these metrics miss the estimates. When that day comes, stocks will likely fall sharply, at least temporarily.

However, the argument in support of Nvidia is clear and straightforward. UPS Analysts predicted this recently artificial intelligence It will be “the most profound innovation and one of the largest investment opportunities in human history.” NVIDIA GPUs are the gold standard in accelerating AI workloads. Analysts say… Forster Research He recently wrote, “Without Nvidia GPUs, modern AI wouldn’t be possible.”

Wall Street analysts expect Nvidia’s earnings per share to grow 33% annually over the next three to five years. These forecasts make its current valuation of 70 times earnings seem fairly reasonable.

Nvidia may or may not be a profitable investment in the second half of 2024. But from its current price, I think the stock can beat the market over the next three to five years.

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Trevor Genuine He has positions at Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has Disclosure policy.

Nvidia stock is up 150% in 2024. History says AI stocks will do the same in the second half of the year (hint: it might shock you). Originally published by The Motley Fool

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