NVIDIA (NASDAQ:NVDA) shares exploded this week as the company surged past earnings estimates. The artificial intelligence (AI) stock was climbing all week before earnings came out, when shares climbed even further. Yet with shares already near 52-week highs, it may not be the bargain investors think it is.
What happened
Shares of NVIDIA stock jumped 8% in pre-market trading on August 24 after the company announced stellar results that beat out earnings estimates. The AI stock announced record revenue of US$13.5 billion, an 88% increase from the first quarter and up 101% from the year before.
It also achieved record data centre revenue of US$10.3 billion, a 141% increase from the first quarter and 171% above the same time last year. Management stated “a new computing era has begun” for the stock. The company’s AI software and GPUs “make up the computing infrastructure of generative AI,” which has been quite popular this year on the markets.
Several cloud service providers are looking to NVIDIA stock for its AI infrastructure, leading to such stellar growth. What’s more, the company underwent a share repurchasing plan, returning US$3.4 billion to shareholders in the form of 7.5 million shares purchased for US$3.3 billion, along with dividends.
But it did so well!
Yes, NVIDIA stock is certainly doing amazing right now, and Wall Street agrees. There is a platform shift towards accelerated computing and generative AI, and NVIDIA stock will certainly be at the head of that. However, the question is whether this is already reflected in the share price. Further consider whether it’s a risky investment considering the volatile market Canadians are in right now.
What’s clear is that AI demand isn’t slowing down, at least right now. While this certainly paints a clearer picture for the rest of tech stocks, it could also be another gold rush of sorts. We went from the popularity of cannabis stocks, to e-commerce stocks and crypto and now are in the AI push. So while there is certainly bound to be more growth in the future, we could see a huge pull back in the next year.
Furthermore, there are issues surrounding supply-chains, China, and accelerated demand that NVIDIA stock will need to keep up with. While it’s likely the stock will outperform in the near term, what we could see in the long term is less clear.
Consider something a bit safer
If you want to get in on the NVIDIA stock action, by all means! But the thing here is you may want to wait for shares to drop back before getting in on it. After all, we’re in an AI gold rush that could slow to a trickle in the years to come. Just as it did for pretty much every other popular sector.
Instead, right now there are quite a few stocks that should do well for long-term investors, and remain popular at the moment. One to consider is Dollarama (TSX:DOL), which investors are still interested in thanks to continued growth.
Dollarama stock does well during times of inflation and high interest rates as Canadians look for lower priced options. What’s more, it did well during the pandemic, leading to better growth than some of its other retail peers.
Finally, the stock continues to see same-store growth along with new store locations popping up around the country. It’s certainly closer to value territory, even though it too trades near 52-week highs. That’s because overall, the company has climbed at a steady clip. Shares are up 7.5% year to date, and 76% in the last five years, offering more stable growth to today’s investor.
