Is it the Right Time to Cash in on Nvidia’s Profits?

Is it the Right Time to Cash in on Nvidia’s Profits?

One of the leaders of the artificial intelligence (AI) revolution is Nvidia (NASDAQ:NVDA). Demand for the company’s graphics processing units (GPUs) and data center services is growing alongside interest in generative AI.

Nvidia shares have soared 280% over the past year. Given the relentless momentum pushing the stock higher, some investors might wonder if it’s time to take profits.

Let’s look at Nvidia’s entire history to determine if it makes sense to reduce your position.

The Nvidia train is moving at full speed, but…

Last year was a big milestone for Nvidia. The company grew its revenue by 126%, while increasing its margins and increasing its cash flow sixfold. With such dominant performance and an optimistic outlook, it’s no surprise that investors have flocked to the stock. And to add some color here, Nvidia has added $1 trillion in market capitalization to its valuation in less than two months.

This is an increase of epic proportions. Nvidia is now the third most valuable company in the world, behind Microsoft And Apple.

The recent momentum pushing stocks higher is likely causing some investors to consider taking profits. I don’t blame them, but as an investor in Nvidia myself, I’ll explain why I see even better days ahead.

Is it the Right Time to Cash in on Nvidia’s Profits?

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…he could easily shift into another gear

Investors should understand that the majority of Nvidia’s growth last year came from its computing and networking businesses. But outside of GPUs and data center services, it offers many opportunities.

The company ended 2023 with $26 billion in cash on its balance sheet, double what it had at the end of 2022. In recent months, it has been investing aggressively in new areas of AI which it can use to complete its material operations.

Specifically, Nvidia invested in two different software companies: a voice recognition company AI SoundHoundand big data analytics start-ups Data bricks. I consider these to be particularly judicious measures. AI-based voice control is an area that many of Nvidia’s large technology cohorts have expressed interest in.

Apple, Amazon, Alphabet, and Microsoft have all invested in this technology and deployed it across their respective smart home and personal computing product lines. Considering that the potential market for voice recognition applications is expected to reach $50 billion by the end of the decade, Nvidia’s initiatives in this lesser-known sector of AI are understandable.

Another area Nvidia is investing in is robotics. The company recently joined Microsoft, Inteland OpenAI in a funding round for Figure AI, which is developing humanoid robots that it plans to market in manufacturing, warehousing and retail.

Goldman Sachs estimates that humanoid robotics could be a $38 billion market by 2035. Nvidia’s GPU hardware, combined with its rapidly growing software services business, puts the company in a unique position to help advance ambitions of Figure AI in more than one way.

Is it time to take some profits?

All of the investments described above tell me one thing: Nvidia’s journey is not over. The company is planning for the future and not sitting on its material cash cow.

That’s why I’m optimistic about the company. Yes, the stock went parabolic and many investors likely made a significant amount of money. But selling a stock just because the price has changed isn’t good financial judgment, it’s a matter of emotion.

I understand that taking some profits is tempting at the moment. There are many unknowns regarding AI, such as emerging developers and potential regulatory measures. Additionally, what decisions the Federal Reserve will make or not make this year is a mystery to say the least, which may increase market volatility in the short term.

But investors should think about the long-term implications. The artificial intelligence (AI) story is only just beginning, and it would behoove investors to continue monitoring the next chapters of the story. For these reasons, I would continue to hold Nvidia as it remains one of the most exciting opportunities in AI right now.

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Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Spatacco holds positions at Alphabet, Amazon, Apple, Microsoft and Nvidia. The Motley Fool holds positions and recommends Alphabet, Amazon, Apple, Goldman Sachs Group, Microsoft and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short 405 calls $ in January 2026 on Microsoft and short $47 calls in May 2024. Intel. The Motley Fool has a disclosure policy.

Is it finally time to take profits at Nvidia? was originally published by The Motley Fool

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