Nvidia is rallying on astronomical revenue growth and stock split. Is it too late to buy stocks?

stock nvidia (NVDA 6.98%) The chip giant rose after once again reporting stellar earnings results. The current stock price has more than tripled over the past year. The company also announced a 10:1 stock split, effective June 7.

Let’s take a look at the company’s most recent quarterly results, one potential risk, its current valuation, and whether it’s too late to buy the stock.

Astronomical Revenue Growth

Nvidia once again showed explosive sales growth as it announced its fiscal first quarter results. Sales surged 262% year over year to $26 billion. Earnings per share (EPS) increased 629% to $5.98.

The data center business led the way with revenue surging 427% to $22.6 billion. The company has achieved strong growth thanks to tremendous demand for its Hopper GPU compute platforms, including the H100 and H200.

Going forward, the company sees its H200 graphics processing unit (GPU) and next-generation Blackwell GPU architecture leading the way. The H200 is currently in production and scheduled to ship in the second quarter, and the company says the new chip nearly doubles the inference performance of the H100 chip. Meanwhile, Blackwell chips are expected to begin shipping in the second quarter and ramp up in the third quarter.

Nvidia said demand for both H200 and Blackwell currently exceeds supply. Blackwell noted that it is backward compatible with the Hopper architecture, allowing customers to easily transition from H100 to H200 to B100 chips (based on the new Blackwell architecture). Considering the current latest chip supply situation, demand for H100 chips is also increasing.

Image source: Getty Images.

pull forward risk

On the earnings call, Nvidia executives were asked about the biggest potential risk facing the company, which is customers overordering and pushing demand forward due to factors such as supply shortages. This is what ultimately derailed cisco Stocks during the Internet boom and subsequent recession.

Nvidia CEO Jensen Huang said the company is racing every day to keep up with demand driven by artificial intelligence (AI) applications from ChatGPT, GPT-40, Gemini and Anthropic. He pointed out that there are 15,000 to 20,000 AI startups across various sectors that need to train end-to-end models, which is also driving demand.

Longer term, Huang said there will be platform changes and that Nvidia is helping redesign how computers work. Instead of using your computer to take instructions and navigate through prerecorded files, it can understand, reason, and provide intelligent answers based on context. This will transform the world’s computing stack.

There is a risk that demand will unwind, something to watch out for going forward, but there are currently no signs of that happening. If AI continues to advance as Nvidia envisions, the company may still be in its early growth stages.

Is it too late to buy stocks?

Despite the stock’s strong performance, Nvidia still trades at an attractive valuation of less than 38x forward price-to-earnings (P/E). Growth will inevitably slow, but this is a cheap assessment of the growth potential the company still has.

NVDA PE Ratio (Forward) Data from YCharts

Currently, Nvidia sells as many GPUs as its manufacturing partners can produce, and the only thing preventing it from selling more is capacity constraints. Therefore, solid growth is expected from increased capacity and the move from Hopper to Blackwell, as chips designed with newer GPU architectures are expected to become more expensive.

Insatiable demand for its products, a long-term outlook for AI data center infrastructure, and a relatively cheap valuation combine to keep Nvidia a buy. So even after the recent run, it’s not too late for investors to buy shares of companies that are helping lead the AI ​​revolution.