Is Buying NVIDIA Stock A Good Long-Term Investment?

Investing in the stock market is one of the most common ways to preserve wealth and gain significant returns. Many people prefer to put a large amount of money in the stock market instead of a savings account because good investments can make their money appreciate faster. However, the stock market is volatile, so investing in it is risky. This is why some people give their money to investment companies to invest on their behalf.

Many factors can affect the price of a company’s stock. Some of them are difficult to foresee, so your investment can quickly go sour. Investors know this, which is why they use various risk management strategies to avoid big losses.

If you want to invest in the stock market, there will be a temptation to go for the companies with the most high-performing stocks. This may not be the best approach because their stock might be overvalued in the short term. It is better to study the fundamentals of the companies you are interested in to understand their core business and learn about their long-term plans.

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Is NVIDIA a Good Company to Invest in?

NVIDIA is a company that designs and manufactures graphic processing units (GPU) for computers, crypto mining, and other professional applications. It has been one of the highest-performing stocks in recent years, making it one of the most valuable companies in the world. On face value, NVIDIA stock seems like a sound investment but you should find out what is driving that growth.

Much of NVIDIA’s stock performance can be attributed to the rise of artificial intelligence. Many technology companies are investing in artificial intelligence, and they need a lot of processing power for their operations. NVIDIA is selling a lot of processing chips and raking in a ton of profit. Investors are impressed with these numbers, so they are buying a lot of its stock.

This demand has overvalued the stock. As of August 2024, NVDA intrinsic value is $78.35 while a share is being sold for $98.91, making it overvalued by 21%. Usually, when a company’s stock is overvalued, its value will return to normal over time. You should factor that into your risk management.

However, NVIDIA is expected to keep growing its revenue and profits in the next three years because the AI trend is still alive. NVIDIA is also so far ahead of its competition that the current performance is expected to continue unless there is a drastic change in the market.

Considering these dynamics, NVIDIA stocks seem to be a good investment but you should keep an eye on the company’s quarterly financials to spot any sudden inexplicably deviation from expert projections.

Endnote

Investing in the stock market is a risky venture. The stock prices of many companies constantly fluctuate, making it almost impossible to accurately predict how a specific company’s stock will perform in the long term. However, there are key indicators that financial experts track to help investors make informed decisions.

For now, those indicators are favorable for NVIDIA, so its stock might be a good asset to invest in. Remember not to panic sell if its stock price dips a little, first find out the reason for the dip and make a decision after.

Disclaimer: The above references an opinion of the author and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. Invest responsibly and never invest more than you can afford to lose.