Nvidia (NVDA -2.09%) has been one of the best performing stocks over the past few years, a run that catapulted it into the world's most valuable company. But over the last month or two, it slipped to second place and then -- briefly -- to third, behind two other big tech companies, Apple and Microsoft.
But don't give up on Nvidia just yet, which rebounded to the No. 2 spot with a market cap of $3.41 trillion. Many Wall Street analysts think the best is yet to come for this crucial supplier of chips to power artificial intelligence (AI). Here's what they think about the company's most recent quarterly results.
Why analysts loved Nvidia's results
The stock has pulled back in recent weeks, but smart investors should recognize this as just noise. Looking back at the company's most recent quarterly results, announced on Dec. 6, pretty much everything is going right for Nvidia now.
An analyst from Wedbush, Dan Ives, called the earnings report "flawless," adding that it "should be framed and hung in the Louvre." He then went on to call CEO Jensen Huang the "Godfather of AI" and called the company's latest Blackwell AI chip the LeBron James of semiconductors.
Ives added, "We believe the path to $4 trillion market cap and beyond is now laid out by Nvidia, and this is bullish for the broader tech rally into year-end and 2025."
After the earnings report, analysts from three other firms -- J.P. Morgan, D.A. Davidson, and Bernstein -- raised their price targets on the stock.
Davidson's Gil Luria said, "Nvidia is well within its means to extend growth into next year given hyperscaler commentary around additional investments in AI compute and the company's ability to deliver even with production setbacks."
And William Stein of Truist said that Nvidia "remains the AI company owing to its culture of innovation, ecosystem of incumbency, and massive investment in software, pre-trained models, and services.”
Although the chipmaker's stock has pulled back recently, Wall Street analysts remain very upbeat about its long-term prospects. Should you be buying the pullback? We'll discuss that next.
How to strategically invest in Nvidia right now
There's a big difference between a business doing well and the stock price doing well. Nvidia is set to grow by leaps and bounds in the years and decades to come.
But the stock price already reflects much of this potential. Even with the total company valued at more than $3 trillion, shares are priced at an astounding 30 times sales. Microsoft, for comparison, trades at just 13 times sales, while Apple trades at a relatively paltry 10 times sales.
Of course, Nvidia's growth rates -- both current and projected -- are far ahead of either of these companies. And demand for AI infrastructure, while growing quickly, is likely still in its infancy. The stock has a high multiple, however, and with that reality typically comes plenty of volatility. Small shifts in industry or company growth prospects can heavily affect the valuation multiple, and thus the stock price.
If you're a believer in AI over the long term, this could be your chance to start building a position in Nvidia. Just don't be shocked if you have some short-term opportunities to add to your investment at a lower stock price.
And consider adding other chipmakers to diversify your position. Nvidia currently has a dominant lead in AI semiconductors, but as previous chip wars have proved, the top dog doesn't always stay there forever.
Nvidia shares are a better deal today than a few weeks ago, but be sure to diversify your position accordingly, with fresh cash available to buy more if short-term volatility arrives again.
