After climbing to prices above $404.85 per share, Nvidia’s market cap reached the $1 trillion mark. However, it is unclear right now whether NVDA is now a permanent member of the “trillion dollar club,” or if the stock merely holds a guest membership.
Since hitting this milestone, profit-taking has caused the stock to level off. As of this writing, Nvidia’s market cap has fallen below $1 trillion.
That said, with shares zooming significantly higher in a brief span of time (thanks to excitement over the company’s artificial intelligence, or AI, catalysts), you may be concerned that more declines are just around the corner. Are they? Let’s take a closer look, and find out.
NVDA Stock: The Trend has Stayed its Friend
Since the start of the year, several tech stocks have benefited tremendously by the acceleration of the AI mega-trend, yet outside of smaller, more volatile names like C3.ai (NYSE:AI), none of these names have rallied to the extent that Nvidia shares have rallied during this time frame.
Year-to-date, NVDA stock is up by more than 178%. Skeptics may believe that much of this is due to “AI mania,” or irrational exuberance about the impact of rising adoption of AI by large enterprises. However, it’s not as if it’s been all sizzle, no steak, for Nvidia and AI.
A few days back, I broke down Nvidia’s latest quarterly results, and how they have enabled NVDA to not only maintain its AI-related gains, but add to them as well. High demand for its AI chips enabled the company to handily beat revenue and earnings forecasts for the preceding quarter.
As seen in management’s upward revisions to guidance, demand is expected to keep rising, to an extent greater than previously expected. Despite these positive developments, which have enabled the stock to pierce the “trillion dollar ceiling,” the market may be starting to take a breather.
A ‘Trillion Dollar Hangover?’
After such a rapid move to materially higher prices, it is only natural for things to calm down. In more recent trading days, NVDA stock has stalled at around the $400 per share mark, as those who bought in at lower price take profit, and others reassess whether now is an opportune time to buy.
Irrespective of whether Nvidia is or is not currently in your portfolio, you may experience the same unsure feelings. If you own it now, you may wonder if it’s time to “take the money and run.”
If you’ve yet to own it, you may on one hand have the fear of missing out, but on the other hand, are concerned that buying now will leave you holding the bag. However, while there may be further profit-taking that pushes NVDA back moderately lower from here in the immediate term, I wouldn’t assume that the stock is on the verge of topping out.
Even as some analysts, like David Trainer of research firm New Constructs, are declaring NVDA is “priced for fantasy,” with any bit of disappointment driving a sharp reversal, such an outcome isn’t set in stone to happen.
The Long-Term Bull Case has Yet to Change
Don’t get me wrong. After making a fast trip back to $300 per share, and an even faster trip up to $400 per share, it may take some time for NVDA to hit even higher price levels, like $500 per share.
However, while it may take some time, don’t assume it cannot happen. AI-related growth, plus a rebound in Nvidia’s non-AI business (GPUs for gaming and PCs), may enable the stock to grow into its current premium valuation.
From there, shares could keep climbing, thanks to AI and other secular growth trends.
If you’re investing with a short time horizon, tread carefully. However, if you have the long-term in mind, consider it still worthwhile to either hold onto or begin building a NVDA stock position.
NVDA stock earns a B rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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