Get rich with Nvidia stock - is it possible?

At the moment, Nvidia's share is certainly benefiting from the hype around ChatGPT, the many competing products, and the increased possibilities for artificial intelligence applications. This is because the group's graphics cards are a popular tool for training the neural networks behind them. Although Nvidia is not the only vendor in the market, it has the largest market share and therefore should be one of the biggest winners from this development.

But so far, there's not much to see in the group's business numbers. In fact, Nvidia is currently struggling with high inventory and associated discounts. For example, in the most recent quarter, sales were down 21 percent from a year ago. Net income was effectively halved to $1.4 billion, or $0.57 per share.

Nvidia also promised pessimistic figures for the business quarter that will last until the end of April. The group now expects sales to fall $1.8 billion to $6.5 billion compared to the previous year. Margins are also expected to be slightly below the previous year's level. Net income is likely to increase.

But this is only due to a one-time effect from the previous year. At that time, earnings were negatively impacted by the failed ARM acquisition.

But another factor may slow the price increase. This is because the stock is now very highly valued relative to earnings. In the most recent fiscal year, net earnings per share were $1.74. Therefore, you are currently paying more than 154 times the profit for Nvidia stock! If Nvidia paid all of its profits, the return would be only 0.6%!

Even if profits were increased tenfold, the return would be only 6%. At the moment, it seems that profits, excluding special factors, will not rise significantly in the near future.

There is no doubt that in the long run Nvidia will continue to grow. But it may not only be difficult to meet the extremely high expectations of investors. If you put the stock in storage now, you should be prepared for the fact that the price may also fall sharply.