What To Do After Nvidia Resumes Sales to China
The quantum computing and AI chip market continued its climb in the last week.
Rigetti Computing (RGTI) broke out to add 40.89% last week. The full-stack quantum-classical computing supplier said that it achieved “a mid-year performance milestone of 99.5% median two-qubit gate fidelity on its modular 36-qubit system, a 2x reduction in median two-qubit gate error rate from Rigetti’s previous best results on its 84-qubit single-chip Ankaa 3 system.”
In the AI chip segment, Nvidia (NVDA) rose after the White House removed a chip sale restriction to China. Insiders like CEO Huang, Kress Colette, and Seawell Brooke continued to sell shares since March. Those sales are not discouraging investors from bidding NVDA stock higher.
Nvidia has two risks to consider.
Valuation Risks
Nvidia trades at a price-to-earnings ratio of around 54 times, nearly 130% above the 23.6x times sector median. Still, Nvidia’s five-year average P/E is around 63 times. This suggests that the company’s accelerated revenue growth more than compensates for paying for the stock premium.
Although unlikely, the U.S. government might renew AI-related chip restrictions. That would limit the addressable market for Nvidia and Advanced Micro Devices (AMD).
Your Takeaway
Shareholders do not need to take profits on NVDA stock. The company has a commanding moat over the competition, which suggests that profit margins will expand.
