Nvidia (NVDA) shares have reached new heights in 2024, fueled by demand for its hardware. artificial intelligence (AI) – Enable graphics processing units (GPUs). With a leadership stake in Amnesty International In the accelerator market, some analysts argue that any upside has already been priced in. However, investors should take into account Nvidia’s position in disruptive technologies, particularly robotics. I remain bullish on Nvidia given its strong cash reserves, technology leadership, and opportunities to dominate new sectors.
One of the reasons for my bullish sentiment revolves around future technological developments – specifically robotics – and Nvidia’s position in this market. Nvidia’s opportunity to dominate the robotics industry is significant, driven by the convergence of powerful AI algorithms, high-performance computing, and advanced sensors.
Nvidia’s strategy benefits from three important components:
The comprehensive universe: A powerful simulation platform that enables the creation of high-fidelity “digital twins” of robotic experiments.
High-end graphics processing units: Cutting-edge hardware such as the Blackwell architecture provides the computational power needed for AI and robotics applications.
Incorporation forms: Large-scale AI architectures optimized for multi-step inference and multi-domain capabilities.
This ecosystem allows Nvidia to simulate, test, and validate robotics applications at scale, significantly accelerating the development process and reducing costs. It also has several advantages over robotics peers like Tesla (TSLA), with analysts pointing to Nvidia’s advanced Internet-scale data processing, simulation capabilities in the form of the Omniverse platform, and synergy between hardware and software.
Interestingly, it is Nvidia enabling the AI revolution that will make robotics a reality in the very near future. Although estimates vary, the AI robotics market is poised for significant growth. Goldman Sachs expects the humanoid robotics market to reach $38 billion by 2035, while more optimistic estimates from Ark Invest point to a potential global revenue opportunity of more than $24 trillion by the 2030s.
In short, the company’s approach of combining powerful hardware, advanced simulation capabilities, and a robust AI ecosystem provides it with a favorable position for growth in the AI robotics market. Furthermore, when combined with Nvidia’s impressive cash flows and financial reserves, it’s not hard to see how Nvidia could dominate.
Furthermore, my upside is exacerbated by the company’s financial strength. Nvidia’s quarterly revenue is a staggering $35 billionup 94% year over year, and free cash flow of $14.9 billion demonstrates its strong market position and financial health. This financial strength means that Nvidia can comfortably make significant investments in long-term R&D, strategic acquisitions, and supporting developers on its platform.
Nvidia is actually taking a collaborative approach to robotics by partnering with multiple robotics companies rather than just focusing on developing its own humanoid robots. This allows Nvidia to leverage its hardware and software ecosystem efficiently without spending huge amounts of money on individual projects, which still carry high implementation risks. For example, the tech giant’s partnership with Figure, a leading humanoid robotics company, sees Nvidia’s Omniverse Isaac Sim used to generate synthetic data.
The AI models are trained on Nvidia’s GPU, and real-time inference runs on Nvidia’s accelerated computing units. Interestingly, the future of robotics is fast approaching, with Nvidia set to launch its “Jetson Thor” computing platform in the first half of 2025. This advanced platform will provide the core processing power needed to bring cutting-edge humanoid robots to life, marking a major step forward. In the field of robotics. A leap forward in robotic capabilities.
The primary justification for my bullish sentiment is undoubtedly the company’s growth-adjusted valuation. Company forward Price to earnings ratio (P/E). The 46.8x for January 2025 is well below the P/E of 106x for January 2024 (when using current prices), indicating strong expected earnings growth. This supports analysts’ expectations of a 127.9% EPS growth rate for fiscal year 2025, followed by 50% in 2026.
Given this exceptional growth rate, Nvidia’s price-to-earnings-to-growth (PEG) ratio of 1.19 (non-GAAP) is an attractive 34.1% below the sector average, suggesting that its growth potential may not be fully priced . This PEG ratio is also 38% lower than Nvidia’s five-year average.
While Nvidia’s valuation metrics are generally higher than the industry average (forward P/E of 46.8x is 81.9% higher than the industry average of 25x), the company’s superior growth rates and dominant position in AI chips justify the premium.
On TipRanks, NVDA comes in as a Strong Buy based on 37 Buys, three Holds and zero sells identified by analysts in the past three months. the Average price target for NVDA stock It is $177.08, which means approximately 17% upside potential.
I’m bullish on Nvidia stock for several reasons, including the fact that its dominance in AI hardware and software positions it well to capitalize on the emerging robotics market. With a cash reserve of $38.5 billion, Nvidia has ample resources to invest in R&D and strategic acquisitions. Furthermore, the company’s collaborative approach, which relies on leveraging partnerships rather than building everything in-house, allows for efficient scaling of the ecosystem.
From a valuation perspective, Nvidia’s forward P/E ratio of 46.8x and PEG ratio of 1.19 suggest that its growth potential is not fully priced despite the stock’s strong performance. And with a strong buy rating from analysts, there’s plenty of support to suggest the stock could rise.
