Nvidia has enjoyed a tremendous valuation increase over the past six months, but the question of whether its high valuation is justified has grown within financial markets. While the stock currently reflects a 55 times forward price-to-earnings ratio, which is much higher than the industry median of 15.5 times that same metric, Ian Mortimer, Fund Manager at Guinness Global Investors, remains confident in the company’s strategies. Mortimer’s fund has owned Nvidia shares for over 10 years and looks beyond the focus on Bitcoin mining to the company’s strong business model, centered around specializing in high-performance graphics processing units (GPUs), which are used to run algorithms powering artificial intelligence technology.
Nvidia has seen huge demand for these GPUs, and at its GPU Technology Conference (GTC) earlier this week announced chips that outperform Intel and AMD equivalents by 25%, while also lowering energy consumption by more than 75%. With these successes, many analysts have now raised their price target for the stock and view Nvidia as a potential leader in the AI and large language model markets.
Ian Mortimer has managed the Guinness Global Innovators Fund since 2006. The fund currently has assets of $580 million, and although Nvidia remains Mortimer’s most expensive holding, he believes that continued success in data centers and cloud computing will keep the company profitable. Nvidia also consistently reinvests in its business while maintaining profitability, giving it a major edge over competitors and reinforcing the stock’s high mark. Additionally, the tech giant has free cash flow averaging $4.5 billion annually since 2018 and reported a net profit of $4.4 billion in the year ending Jan. 2023.
Nvidia is a technology company specializing in designing graphics processing units, or GPUs, and other technologies related to artificial intelligence, deep learning, natural language processing, and cloud computing. The company was founded in 1993 by Jen-Hsun Huang and Chris Malachowsky and is based in California, USA. For almost three decades, Nvidia has been a leader in the computing and graphics industries, and has recently become a major player in the new and expanding market of AI, deep learning, and natural language processing. With its strong focus on AI-related technologies, Nvidia has seen a surge in demand for their GPUs and continues to find innovative ways to capitalize on their successes.
