Nvidia Corporation (NASDAQ: NVDA) stock has risen over 17% in the past three months and over 46% in the year so far. The shares are recovering from the slump it experienced during the year-end 2018. Investors believe that the semiconductor firm’s future lies in the hands of artificial intelligence, which is the new promising growth area.
Last year, the company has struggled with the macroeconomic uncertainty and trade war concerns, which dragged the stock down to the lowest in two years. Nvidia blamed the shortfall on the slowdown in the business of processors. The semiconductor industry particularly remained risky while Nvidia is an exception due to superior growth potential in the long term.
Nvidia is currently in the middle of overvaluation and competitiveness as the current valuation levels hinted of attractive returns in the future. For this, the company is expected to deliver robust revenue growth and upbeat earnings in the upcoming quarters.
The company has been struggling in the automobile segment due to the stiff competition prevailing in the industry. The company has been fighting for a piece of the pie in this segment. Also, the revenue growth rates could be negatively impacted by the maturity of the PC market as Nvidia has a considerably larger presence in the gaming PCs.
On the other hand, the company’s results will improve due to the expansion of the number of applications for graphics processing units (GPUs) with AI turning to be the most promising new growth areas. The GPU demand for Nvidia is likely to skyrocket due to the continuous growth of AI. However, this could tighten the tech competition as a large number of Chinese players are developing a wide-range of AI solutions.
The AI market could be behind the big demand for Nvidia, whose shares are likely to turn optimistic in the upcoming years. The AI segment could be the fastest-growing market opportunity for the company due to the possible jump in the digital-voice assistants in use by 2023.
In the near term, the company could face mixed data-center sales and weak cloud-computing spending later this year. This is likely to hurt Nvidia’s results for the near term while long-term opportunity turned out to be positive. This could lift the stock in the future.