Should I buy Nvidia stock as an Australian investor?

Regular readers would know already that Nvidia Corp (NASDAQ: NVDA) is the hottest stock on the planet right now.

Customers are buying the company’s processing chips faster than it can make them, thanks to the huge computing power required for artificial intelligence (AI).

Nvidia’s last four quarterly results have all exceeded analysts expectations.

Accordingly, the share price has now gained a mind-blowing 239% over the past 12 months.

If you go back to October 2022, just before ChatGPT opened to the public and lit a fire under anything AI related, Nvidia stocks have surged 601%.

That’s a 7-bagger in just 16 months, folks.

So is it time to open up your US broking platform and grab some of this action?

The anxiety of flying stocks 

Of course, the big worry with stocks that have run up so much so fast is the lofty performance expectations on the business.

Nvidia could now be in a spot where even an update that merely meets expectations might not be enough to keep the stocks from sinking.

After all, there are plenty of short-term traders who will quickly pounce on any sign to offload their shares, take their winnings, and go home.

A related issue is that even if Nvidia keeps smashing it, the upside for the stock could be limited.

After the recent bull run, the PE ratio for the tech stock now stands at 66. 

According to TipRanks, the average share price target among 40 Wall Street analysts is US$867.93. That’s only about a 10% potential gain from the current level.

Sure, a 10% gain is nothing to sneeze at. But you could be severely disappointed if you’re buying Nvidia shares now with the hope that they’ll triple by this time next year.

Alternatives to Nvidia stocks

That is not to say Nvidia can’t keep this spectacular run going. Anything can happen.

But for me, with the uncertainty of whether that can happen or not, there are better uses of my spare investment cash.

Even if you want to invest in the same theme of computer chips or artificial intelligence, there are other stocks that could provide a better bang for buck.

Take Taiwan Semiconductor Mfg Co Ltd (NYSE: TSM) as an example.

The semiconductor maker is further up the supply chain, selling its products to chip makers such as Nvidia.

The TSMC share price has doubled since ChatGPT was unleashed in the world, so it has been no slouch for investors.

But the stock currently trades at a more sane PE ratio of 25, perhaps giving it more room to grow its valuation even if the future is not perfectly laid out.

All five Wall Street analysts covering TSMC reckon it’s a buy, according to TipRanks.

The post Should I buy Nvidia stock as an Australian investor? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 1 ASX stock I think is just as hot as Nvidia (without all the hype)
• Here’s how the ASX 200 market sectors stacked up this week
• The Brainchip share price is up 213% this month. Is Nvidia to blame?
• Is the Nvidia share price on course to reach US$1,400?
• Why are ASX tech shares booming on Friday?

Motley Fool contributor Tony Yoo has positions in Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/X6zv12l