How Nvidia Stock Can Keep Crushing the Market in 2023 and Beyond

Stocks to buy

For investors in semiconductor maker Nvidia (NASDAQ:NVDA), it’s been an incredible start to 2023. Shares of NVDA stock have nearly doubled in just three short months to start the year. That’s some incredible performance and a pace of growth that’s unlikely to continue from here.

That said, there’s good reason for this outperformance.

Of course, most investors’ interest in chip makers like Nvidia is driven by the industrial uses of these chips. Given that Nvidia is a higher-end producer of GPUs and other key products, growth in areas like artificial intelligence can drive growth over the long term. This has always been the case for Nvidia, which is on the cutting edge of technological innovation. Crypto and gaming might be out, but the cloud and AI are still in.

With that said, let’s dive into a few more reasons why I think NVDA stock could continue to outperform this year and beyond.

Plenty of Developments Driving NVDA stock

As mentioned, artificial intelligence is a key focal point for investors right now. For Nvdia stock, this has proven to be a big catalyst to start 2023, to be sure.

That said, Nvidia isn’t just talking the talk when it comes to AI. The company has unveiled a range of measures to expand its foothold in artificial intelligence (AI), encompassing new products and partnerships. During a keynote speech, CEO Jensen Huang declared that the company is currently in the equivalent of an “iPhone moment” for AI. In addition, Nvidia reported robust financial results on February 22, buoyed by its data center business segment, primarily composed of AI chips.

The term “generative AI” has become a buzzword in the tech industry and is creating a buzz in the AI community. During a recent call, CFO Colette Kress emphasized that AI adoption is at a turning point. She cited Open AI’s ChatGPT as a game-changer, as it has generated worldwide interest and allowed people to witness the potential of generative AI firsthand.

NVDA dominates the AI industry due to its all-inclusive range of services, such as supercomputers, data processing, algorithms, and training modules. In addition, the company has an advantage in providing AI services across multiple sectors and is constantly innovating to maintain its lead.

Strong Fundamentals

Although NVDA shares witnessed a significant drop in 2022, 2023 has been fruitful. However, NVDA stock is still roughly 30% below its peak seen in November 2021. Despite the stock’s high valuation, analysts on Wall Street are carefully optimistic about investing in NVDA stock, as it has received a moderate buy consensus rating based on 25 buys, six holds, and two sells. These ratings have culminated in an average analyst estimate of $256.39 per share for NVDA stock, indicating a potential upside of roughly 10%.

That’s not incredible, but it’s still higher than where the stock is trading right now. And considering how violently this stock has moved to the upside, I wouldn’t be surprised to see more analysts re-rating this stock higher.

The company’s fundamental growth drivers remain intact, making Nvidia among the easiest companies for investors to assign a higher-than-market multiple to. Interestingly, I don’t think multiple expansion is necessary for NVDA stock to go higher. This is a company with strong fundamentals and secular growth tailwinds that should take it higher over time.

Wrapping It All Up

With a focus on innovation and partnerships, Nvidia is among the clear winners of the surge in AI interest. Until this tailwind abates and investors move on to the next thing, NVDA stock will likely remain hot. That’s the near-term picture.

Over the medium term, Nvidia represents a play on broader high-tech adoption. As mentioned, whether it’s AI, gaming, crypto, cloud computing, or a variety of other sectors, where one sector lags, another will pick up the slack. This is true over the long term as well.

Thus, I think Nvidia remains a company worth buying for investors with any reasonable time horizon. NVDA stock is running hard right now but will likely continue growing much larger over time.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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