Nvidia (NVDA.O) shares extended gains in the first three trading days of this week, hitting an all-time intraday high of $546. Prior to this, the stock had been trading in a sideways consolidation range for eight consecutive months.

Nvidia's market capitalization is now $1.34 trillion, making it the fourth-largest company in the S&P 500 (SPX) and just $250 billion away from Amazon (AMZN.O) in terms of market value.

Nvidia has had a stellar year thanks to the generative AI revolution. The company sells the most popular chips that help big tech companies implement AI technology.

Katie Stockton, co-founder of Fairlead Strategies, believes that Nvidia stock could continue to rise after breaking through $500. She told clients on Tuesday:

“On Monday, Nvidia decisively cleared the critical resistance around $504 in an unconfirmed breakout… In the medium term, the weekly MACD showed a new buy signal. Nvidia resumed its long-term uptrend with an initial forecast target price of $602.”

Nvidia's P/E ratio has dropped significantly

Market veteran Ed Yardeni noted that even though Nvidia's stock price has soared nearly 250% over the past year, its price-to-earnings ratio has fallen significantly.

He highlighted in a note Monday that Nvidia's forward price-to-earnings ratio has fallen to 26.4 times today from a record 84.3 times on June 14. While that's a premium to the S&P 500's forward price-to-earnings ratio of about 20 times, it's lower than Amazon and Microsoft's multiples and roughly the same as Apple's.

'British Buffett' warns investors to be cautious

Different from the bullish views of the above two, Terry Smith, a fund manager known as the "British Buffett", said in a letter to shareholders in September that the market currently believes that Nvidia and Microsoft (MSFT.O) have won the game of artificial intelligence, but history has proven that the market is always wrong. He warned investors to be cautious:

"Looking back over the past half century, it is rare for first movers in technology to become long-term leaders, from Nokia (NOK.N) to Intel (INTC.O) to the current decline of BlackBerry (BB.N)."

Smith pointed out that artificial intelligence is not a new concept. The AI ​​craze this year was mainly due to the popularity of ChatGPT, which led to a surge in Microsoft's stock price. It is too early for the market to conclude that Microsoft and Nvidia are the ultimate winners. History has proven that pioneers will eventually fall.

Domestic customers are not interested in the "low-profile" chip

The recent correction of Nvidia's stock price was mainly due to the market's concerns that Nvidia's stock price had overdrawn its future too early, and the chip export restrictions imposed by the US Department of Commerce further pressured Nvidia's stock price. For this reason, Nvidia has made multiple chip downgrades, but as a result, the performance gap between it and domestic alternative chips has continued to narrow, and the "low-profile" chips have enhanced the market competitiveness of domestically produced chips.

China is one of Nvidia's largest markets, and previously this part of its revenue accounted for one-fifth of its total revenue. Nvidia cannot give up this market. However, it has to cope with the pressure from US regulators while supplying the chip needs of Chinese customers. At present, this task is indeed difficult.

However, there is good news in the near future. Nvidia officially announced at the International Consumer Electronics Show CES that it will launch three new desktop graphics chips with additional components that will allow gamers, designers and other computer users to better utilize AI on their PCs without relying on remote services accessed over the Internet.

In addition, the company will also reach cooperation with four Chinese automakers, including Li Auto (LI.O), Zeekr, Xiaomi, and Great Wall Motors (02333.HK), all of which will use NVIDIA's Drive technology in their autonomous driving systems. Currently, NVIDIA DRIVE Thor is scheduled to be mass-produced in 2025. It can be used in both assisted driving systems and in-vehicle infotainment applications, with a computing performance of about 2000 TOPS.

The article is forwarded from: Jinshi Data