The artificial intelligence boom reached new heights when Nvidia (NVDA) reported earnings last week. The semiconductor company, which makes the chips that power AI, gave investors plenty of reason to be excited. Reporting a double earnings beat, the company forecasted record revenue of $11 billion for its current quarter.
Nvidia's stock jumped in the hours and days following its earnings; the company finally exceeded a $1 trillion market cap May 30 (its market cap pre-earnings was around $750 billion).
And it was all driven by demand for AI.
DON'T MISS: Analysts Just Doubled Their Price Targets for One Powerful Stock
In the midst of this surge, some investors are starting to doubt the tech giant, saying that the valuation implies a sales growth that is unattainably high.
Cathie Wood, the CEO and investment lead for Ark Invest, echoed that sentiment, saying May 29 that the company is "priced ahead of the curve" and criticizing investors who are under the impression that "Nvidia is the only AI play."
But even though Nvidia's current valuation is around 25 times the company's expected revenue for the year, Mad Money host Jim Cramer thinks the stock, still in an advantageous position, is worth its lofty valuation.
"I know there are people who are deriding the valuation of Nvidia. But the valuation is more of an art than many would like," Cramer Tweeted. "If (NVDA) is right then every major company, save Apple, is dependent on it. Every one. What is that worth? The subject is daunting. Humbling."
Cramer previously said that he is "in awe" of Nvidia's CEO, Jensen Huang, for essentially foreseeing the coming AI boom and building up a big inventory of GPU chip materials before the demand started spiking.
