Nvidia (NASDAQ:NVDA) stock surged in 2024, becoming the world’s most valuable company — before losing the crown to Apple. However, the growth’s outstanding. In fact, a £10,000 investment in 2020 would now be worth £244k.
Analysts love this stock
Despite the incredible performance of the shares in 2024, analysts remain very bullish on Nvidia. There are currently 37 Buy ratings and three Hold ratings. The average price target’s $177, inferring the stock’s undervalued by around 20%.
This is further supported by a price-to-earnings-to-growth (PEG) ratio of 1.28, representing a 29% discount to the information technology sector average and a 34% discount to Nvidia’s five-year average PEG.
What comes after picks and shovels?
Picks and shovels is an investment strategy that sees investors buying the suppliers that fuel industries. In this case, investors flocked to Nvidia, with its graphics processing units (GPUs) deemed vital to the revolution in artificial intelligence (AI).
Investors will likely continue this strategy through 2025. Apple supplier Foxconn reported record sales on Monday 6 January, resulting in AI-focused stocks pushing higher still — Nvidia gained 3.4%, and that’s a big jump for a $3trn company.
However, AI’s already starting to improve efficiency around the world, driving productivity, margins and earnings. Companies like Swedish fintech Klarna stopped hiring humans last year and is instead using AI to do their jobs. This is the second phase of the AI revolution.
Ok, so what about Nvidia?
Well, Nvidia’s poised to dominate in the most exciting and productivity-enhancing segment of AI, and that’s robotics. The AI robotics market may represent the next massive leap for humankind, offering vast improvements in efficiency and productivity.
Unsurprisingly, Nvidia could surpass peers such as Tesla (yes, Tesla is big into robotics) in this sector. It’s got high-powered chips, it’s got large-scale foundation models, it’s got cash flow, and it’s got the Omniverse, a powerful simulation platform that enables the creation of high-fidelity digital twins for testing and experimentation.
Nvidia’s also taking a clever approach, partnering with several pure-play robotics companies like Figure AI, giving it the best chance of having a stake in the most successful humanoid robots of the future.
Expectations for the AI robotics sector vary greatly, with Goldman Sachs forecasting it could reach $38 billion by 2035. Meanwhile, Ark Invest takes an even more optimistic view, predicting a global revenue opportunity exceeding $24 trillion by the 2030s. I’d suggest the exploitation of robotics shouldn’t be underestimated.
The bottom line
Nvidia’s a powerhouse of the technology sector, and it’s more than just a chip designer. The AI ecosystem, developed over the last decade and more, positions it at the forefront of emerging technologies, and especially robotics. However, investors should certainly be wary that things can change quickly in the tech space. AMD’s hot on Nvidia’s heals and aims to take away some of the company’s dominance in the coming years. Nonetheless, it’s a stock I’m considering buying more of.
