Jensen Huang Says Nvidia Has Unlocked a New Growth Opportunity the Company Hasn't Gone After Before
Key Points
Nvidia's GPUs have been in high demand due to artificial intelligence (AI).
The company's new Vera CPU chip enables it to tap into opportunities related to agentic AI.
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When a company such as Nvidia (NASDAQ: NVDA) has grown the way it has -- at an exceptionally high rate for years -- you may be tempted to believe that it may soon be approaching a peak. However, according to CEO Jensen Huang, that isn't the case at all. In fact, Huang still sees some exciting opportunities ahead for his company.
On its recent earnings call, the company identified a new opportunity worth hundreds of billions of dollars that could enable its growth to remain strong for the foreseeable future. Here's why this massive stock, with a market cap of $5.1 trillion and a 1,200% gain over the past five years, may still have more upside.
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The company has a new chip focused on agentic AI
Artificial intelligence (AI) has driven demand for Nvidia's cutting-edge chips in recent years. At this stage of the AI revolution, there's a greater focus on agentic AI, which is where AI can take on multi-step processes. While GPUs, which Nvidia is known for, help with the sheer processing power that is necessary when deploying AI, it's CPUs that are needed to manage agentic AI.
There is still plenty of demand for the company's GPUs, but Nvidia is now also offering a new chip that will focus on agentic AI. It recently unveiled its Vera chip, which it says is the CPU for agents. Huang said on the company's recent earnings call that this opens up a new $200 billion total addressable market for Nvidia, one that it never went after in the past. And with hyperscalers and tech giants investing heavily in agentic AI now, it yet again puts Nvidia in a prime position to capitalize on ways to grow its revenue.
Why Nvidia's stock may still look cheap
Nvidia's stock has been soaring in recent years, and it's now the most valuable company in the world. But because its earnings have taken off, the stock may still not appear to be all that expensive. It trades at a forward price-to-earnings multiple of 24, which is based on analyst expectations for how it will do in the year ahead. And when looking at the next five years, its price-to-earnings-growth multiple is 0.65, which is well below the 1.0 cutoff that suggests a stock is cheap.
There are risks with the stock because it can be vulnerable if there's a slowdown in tech investments into AI. However, with AI spending showing no signs of slowing down just yet, the stock may remain a good buy despite its impressive gains.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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