Should You Invest in Nvidia?

26 Jun 2024

Nvidia's done it! Nvidia's become a company worth $3 trillion! And it only took the company a little over three months to do so.

You don't need me to tell you how impressive that is, especially considering that it was only in March that Nvidia hit the $2 trillion market valuation for the first time. What's impressive still is that some analysts believe the company is headed for a $5 trillion market valuation a couple of years from now.

Which begs the question, should you invest in Nvidia? Well, dear reader, here are some of the arguments for and against investing in the company.

Now, before you go and start pouring in all your life savings into buying Nvidia stocks, there are a few things you may want to consider. First, don't expect to make massive gains if you decide to buy the stock now. According to The Motley Fool, the upside is probably 50% based on current pricing if the company hits a market cap of $5 trillion.

Compare that to the fact that people who bought the stock at the start of 2023 saw a meteoric rise in the value of their shares: a whopping 8,280%! In fact, if you had invested in Nvidia's stock at the start of this year, you would have already seen a gain of 174%!

By that comparison, 50% probably feels like peanuts. Like Axios wrote back in February: Investors who bought Nvidia a while ago are very happy. Those who buy it today may not be.

Still, proponents of investing in Nvidia point to the company's virtual monopoly in supplying the hardware necessary to power generative artificial intelligence. With no end to demand in sight, and given that AMD is yet to offer a formidable alternative to Nvidia's hardware, it's no wonder then that Wall Street expects the company to nearly double its revenue in fiscal 2025 to $120.5 billion and follow it up with a 33% rise in sales in fiscal 2026.

The generative AI boom isn't the only thing that is helping Nvidia, though. Some other factors that will drive the company's business is a subsiding in inflation which is expected to open up demand for graphic cards, meaning the company will likely see a bump in GPU sales come update cycle.

BUT, and there's always a but, Nvidia's stock is susceptible to volatility. We've already seen some of this play out this past week, when, after briefly becoming the most valuable company in the world, a mere few %age point reduction in share price wiped more than half a trillion off of the company's valuation, prompting The New York Times to opine that the "artificial intelligence stock boom could be tough to sustain."

Some publications, like London's Financial Times, are also comparing Nvidia's rise to that of Cisco back in 2000. In March 2000, the networking equipment maker became the world's most valuable company, only to lose nearly all of its value as the dotcom bubble hit in the subsequent year.

"Nvidia will decelerate," Barry Bannister, chief equity strategist at Stifel, was quoted as saying by the FT.

The recent Nvidia selloff, which saw the company's stock slump 13%, made short sellers $5 billion richer, which would make it appear that there are investors who believe up isn't the only direction the stock will go.

Regardless of whether you think the stock will go up or down, there is enough research out there that supports either thesis. Just don't go to Reddit for advice :-)

Nvidia ranked #5 on HackerNoon's Tech Company Rankings this week.

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Tesla Sues Supplier for Stealing Trade Secrets

Tesla is seeking billions in dollars in damages from Matthews International for allegedly stealing confidential trade secrets related to the automaker's dry-electrode battery manufacturing technology and disclosing them to its competitors.

Matthews became one of Tesla's suppliers in 2019, and the automaker said it shared confidential designs of industrial machinery necessary for the manufacturing process of its batteries after it entered a nondisclosure agreement with the electric vehicle producer.

"Matthews betrayed that trust," Tesla is alleging in its lawsuit.

Tesla went on to accuse Matthews of using its designs and passing them off as its own and building and selling equipment for dry-electrode battery manufacturing that are based on its "confidential trade secrets."

On the other hand, Matthews is claiming that Tesla is bullying the company and wants to strip it from its intellectual property. In a statement after the lawsuit was filed, the company said that its engineers had been developing technology that served the basis of dry battery electrode solutions well before the formation of Tesla as a company.

It was precisely because of Matthews' work that Tesla approached the company in the first place and narrowed it down as a supplier.

Both sides plan to pursue this in court, so let's see how it plays out.

Tesla ranked #4 on HackerNoon's Tech Company Rankings this week.

In Other News.. 📰

  • Renewed Bullishness Expected After Bitcoin, Ether's $10B Options Expiry on Friday — via CoinDesk
  • AThis smiling robot face made of living skin is absolute nightmare fuel — via TechCrunch
  • Microsoft faces mega fine after EU takes issue with bundling of Teams and Office — via CNN
  • AI dataset licensing companies form trade group — via Reuters
  • Book authors get a startup to help them deal with AI companies — via Axios
  • U.S. chip curbs in Middle East just 'business as usual,' Ooredoo CEO says after Nvidia deal — via CNBC

And that's a wrap! Don't forget to share this newsletter with your family and friends! See y'all next week. PEACE! ☮️

Sheharyar Khan, Editor, Business Tech @ HackerNoon

*All rankings are current as of Monday. To see how the rankings have changed, please visit HackerNoon's Tech Company Rankings page.

Tech, What the Heck!? is a once-weekly newsletter written by HackerNoon editors that combine HackerNoon's proprietary data with news-worthy tech stories from around the internet. Humorous and insightful, the newsletter recaps trending events that are shaping the world of tech. Subscribe here.