Surely Nvidia stock can’t just keep rising?

Nvidia has been one of the hottest stocks on the market. But what could this year and beyond have in store for the chipmaker?

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Image source: NVIDIA

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For a brief period on 5 June, Nvidia (NASDAQ: NVDA) surpassed Apple as the world’s second most valuable company by market-cap as its stock continues to soar.

At one stage, the company was valued at $3.01trn, trumping Apple, which finished the day valued at $3trn.

It has since retreated. However, with its share price rising 209.2% in the last 12 months and 3,187% over the last five years, I wouldn’t be surprised to see it make another surge soon. It may challenge Microsoft, which is the most valuable public American company at $3.14trn.

But what could 2024 have in store for its share price? Surely it can’t just keep rising?

Room for more growth?

Well, plenty of brokers seem to think so. For example, HSBC recently lifted its target price for the stock to $1,350. At the time, that represented a 49.3% premium. In under the space of almost a month, Nvidia has closed that gap and it now represents an 11.6% premium.

Quite frankly, if the stock keeps up this incredible form, where it finishes come the end of 2024 is anyone’s guess.

The next wave of growth

But looking past this year, what could the next decade have in store?

Well, there’s no doubt in my mind the artificial intelligence (AI) sector will keep booming and Nvidia will be at the forefront of this. In its latest results, founder and CEO Jensen Huang said “the next industrial revolution has begun” and that the firm was primed for its “next wave of growth”.

Titans such as Google, Microsoft, and Tesla are queuing up to get their hands on more Nvidia products and demand doesn’t seem to be slowing anytime soon. Analysts forecast revenue to top a staggering $156bn by 2026. It’s fairly easy to see why.

All just hype?

But while it’s easy to get excited about Nvidia, I’m incredibly cautious. Its share price has skyrocketed but is that just carried away investors pushing the stock up? Has it gone too far, too soon?

It’s more expensive than all of its Magnificent Seven peers when looking at key valuation metrics, such as the price-to-earnings ratio.

While it seems like a slowdown in growth isn’t possible right now, I’m sure it’ll come. At that point, we could see its share price nosedive.

A conundrum

I’m holding off from buying any more shares in Nvidia for the time being. At its current price, and given the hype the company’s receiving, I’m cautious we could see its share price recoil at some point. Of course, if Nvidia keeps beating expectations, I could be wrong.

That does leave me with a conundrum. I’m currently sitting on a 180.2% paper gain with my Nvidia position. I can do two things. I could take some profit and use it to reinvest elsewhere. My portfolio needs some pruning, so this could make sense.

On the other hand, I could sit tight and hope its share price keeps going higher. That said, I don’t want to be greedy. I also don’t want to attempt to time the market. I fear that could be a mug’s game. I’ll have to decide over the coming days what steps I plan to take next.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Charlie Keough has positions in Apple, HSBC Holdings, and Nvidia. The Motley Fool UK has recommended Alphabet, Apple, HSBC Holdings, Microsoft, Nvidia, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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