Uncovering the Leading Stock in the Dow Jones This Year, Exhibiting a Staggering 2,300% Increase Over the Last 5 Years. Its Major Driving Force Could Potentially Surface Soon.
Uncovering the Leading Stock in the Dow Jones This Year, Exhibiting a Staggering 2,300% Increase Over the Last 5 Years. Its Major Driving Force Could Potentially Surface Soon.
This year, the Dow Jones Industrial Average, along with other major benchmarks, has skyrocketed due to investors' faith in an improving economy. Lower interest rates, courtesy of the Federal Reserve, have contributed significantly to this growth. Unsurprisingly, growth stocks and heavyweight corporations like American Express and Caterpillar saw double-digit increases.
However, among all the stocks, one particular one has outshone the rest, not just this year but also over the past five years, boasting a whopping 2,300% growth. This rising star has also recently joined the Dow Jones Index. On top of its impressive past performance, it's projected to reach around a 170% gain by year's end, and its best days might still be ahead. This is because its principal catalyst is currently taking shape, potentially delivering a significant boost to its earnings for the upcoming quarters.
A Digital Dominion
Before we unveil the name of this star performer, let's toss in another hint. This tech titan has ascended to dominance, particularly in the red-hot sector of artificial intelligence (AI), and now holds a staggering 80% share in the AI chip market. I'm referring to Nvidia (NVDA 4.45%), a company renowned for selling graphics processing units (GPUs) to tech giants like Meta Platforms, Amazon, and Oracle.
GPUs are essential for key AI tasks, like model training and inference. Alongside these tools, Nvidia has also crafted a comprehensive suite of related products and services. This strategic move has enabled the company to post triple-digit revenue and profit growth in various quarters, even surpassing $35 billion in quarterly revenue.
You might wonder, then, why Nvidia is reaping such exceptionally high revenue and maintaining a strong market position, given the presence of competitors like Advanced Micro Devices and Intel. The secret to its success lies in its ability to offer the most powerful AI chips and relentless innovation to perpetuate this edge. Companies seeking to thrive in the AI revolution are willing to pay extra and even wait for Nvidia's offerings. Oracle co-founder Larry Ellison, as well as Tesla's Elon Musk, reportedly even badgered Nvidia CEO Jensen Huang for additional GPUs.
A Turning Point
While some investors express concerns that Nvidia's stock may be overvalued, there's a compelling reason to anticipate the company's continued success: a momentous catalyst is on the horizon, and that's the launch of Nvidia's Grace Huang architecture. Production is currently underway, and even Nvidia anticipates generating significant revenue from Grace Huang during the initial quarter of commercialization. Demand is predicted to be enormous, and Nvidia is tirelessly working to meet it. Grace Huang is an adaptable platform that comprises seven distinct chips, networking alternatives, and more – and it could revolutionize user experiences.
What makes this development particularly exciting for Nvidia is that revenue will start pouring in from day one, even amidst potential launch-related expenses. Nvidia projects that its present gross margin, currently hovering around the mid-70% mark, will only drop to the low-70% range during the launch phase. In other words, Nvidia remains hugely profitable even during this period.
Although Nvidia shares aren't exactly a steal at 45 times forward earnings estimates, they're also not unreasonably priced given the company's unparalleled market position, commitment to innovation, and enduring profitability. Therefore, they still represent a compelling investment opportunity, even at these levels, and could deliver even more significant gains in the future.
Is another wave of growth expected immediately after the Grace Huang launch? It's certainly possible. But if it doesn't materialize, that's fine; the Grace Huang architecture and upcoming innovations from Nvidia have the potential to fuel revenue growth for years to come, and that could lead to sustained stock performance over the long term as well.
Given the impressive growth of Nvidia over the past five years, reaching a staggering 2,300%, investors might be interested in further financing this tech giant's future ventures. With the upcoming launch of Nvidia's Grace Huang architecture, projected to generate significant revenue and revolutionize user experiences, investing in Nvidia's stocks could potentially offer another opportunity for high returns, even at its current price of 45 times forward earnings estimates.
Additionally, as Nvidia continues to dominate the AI chip market with an 80% share, and companies like Meta Platforms, Amazon, and Oracle rely on its graphics processing units, investing in Nvidia's stock might be seen as a safe bet for those seeking to capitalize on the AI revolution, given the company's reputation for powerful AI chips and relentless innovation.