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In recent days, the financial world has entered a Tizzy on a new start-up in the field of artificial intelligence (AI). Chinese company In depth Sent shock waves worldwide after having published a model similar to Chatgpt.
The main reason why investors are that Deepseek claims to have formed his model on older and less sophisticated chippeau software from Nvidia(Nasdaq: NVDA). These statements have let investors scratch their heads, wondering if Nvidia’s most recent architecture is worth the high price.
Consequently, Nvidia’s shares have entered a spiral down several days. Is it an opportunity to buy, or could Nvidia stock can be directed much lower?
Below, I will analyze certain interesting trends in Nvidia’s actions and plead in the direction I think that the actions could be directed.
The graph below illustrates several sales observed in the actions of Nvidia in the days following the arrival of Deepseek. Although you thought the decreases of this magnitude say everything, there is actually something interesting in the background.
When a scholarship course is changing, the value of the company too. In the case of NVIDIA, the company’s Creation Action Course led to up to $ 600 billion in lost market capitalization.
Since Nvidia’s market capitalization has dropped, so it also has its evaluation multiple. To date (January 29), the Multiple Profits of NVIDIA (P / E) is 30.1.
Below, I will dive why this contraction in the multiple evaluation is important and what history suggests could occur afterwards.
Image source: Getty Images.
In the table below, I summarized P / E from Nvidia at the end of the quarter of the last year.
Category
31/10/2023
1/31/2024
04/30/2024
07/31/2024
31/10/2024
Current
Price to be transmitted to profits (p / e)
24.5
30.4
35.7
44.6
33.9
30.1
Data source: Yahoo! Finance.
The last time the Nvidia striker, P / E, flew over thirty was last January. This is important to note because in January 2024, Nvidia’s market capitalization was 1.5 billion of dollars – about half of what it is today.
Given the parity between the p / e of the company here a year ago, you could be inclined to think that Nvidia’s actions will increase – as was the case throughout 2024. Although it is Such a dynamic is what history suggests could happen, there are important nuance to consider this time.
Given that P / E Multiple current of Nvidia conforms to the place where he was a year ago despite the doubling of the market value of the company, this implies that Wall Street analysts also expect that The profits of Nvidia double.
I looked at a different way, if the market capitalization of Nvidia had doubled, but that the income of the company did not accelerate at a proportional rate, then the front of Nvidia would have widened. This is a concept known as the evaluation expansion.
But as I pointed out in the intro, the Deepseek scenario calls into question what the trends of demand for AI infrastructure look like – in particular the graphics processing units (GPU), which are bread and Nvidia butter.
Candicement, I would not be surprised to see some analysts starting to cut the projections of income and profits for Nvidia. Although this does not mean that Nvidia should be considered overvalued, I think that investors should allow industry experts to digest Deepseek news and refine their models accordingly.
In other words, the P / E Before Nvidia is almost identical to the place where it was perhaps there is a little coincidence, because the benefits of profits will almost certainly change – questioning relevance of the P / E ratio is now.
At a broader level, however, I am convinced that Nvidia will remain a leader in the AI race, because its GPUs should continue to play an important role in the development of technology in the future. How much? This is the question of the billion dollars.
Thus, although history can suggest that the value of Nvidia could double this year, I would think about it twice. In the long term, I think there is still a lot of value to be recognized by investing in Nvidia actions. I do not think that the actions will double in 2025.
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