NVIDIA (NVDA 198.92, +1.75) is set to close out another banner year, having climbed 86.4% since the end of 2016. This leaves the stock trading at a forward P/E ratio of 42.8x.
Shares of the GPU manufacturer have pulled back about 10.0% from their early-November record, but that dip has been modest compared to the stock's impressive run since the end of 2014 when it traded near $20.00. NVIDIA gained 64.4% in 2015 and followed that with a 223.9% surge in 2016.
The breathless rally in the stock was fueled by fundamental factors, but momentum trading strategies likely accelerated the stock's advance to a dizzying pace. NVIDIA solidified its position as the leading manufacturer of GPUs by releasing its GeForce GTX900 series cards in late 2014, followed by the launch of the GeForce GTX1000 line in 2016.
The launch of the GeForce GTX1000 series represented a massive performance leap over the GTX900 series and it was coupled with increased energy efficiency. In the past, NVIDIA's target market was the gaming community, but the advancements in GPU technology turned video cards into an essential part of datacenters and autonomous driving systems. In addition, GPUs are used for mining cryptocurrencies.
It is worth pointing out that the company is now flexing its muscle, looking to stop customers from using lower-priced GPUs in data centers. NVIDIA recently altered its user agreement to prohibit the deployment of deep-learning applications on GeForce GPUs.
Given the level of offered performance, it is possible to run a small data center on several GPUs intended for the gaming market instead of purchasing higher-priced hardware. The company's strongest card for the gaming market—the GTX 1080 Ti based on Pascal architecture—retails for $700 while the lowest-priced offering for data centers—Volta-based Titan V—costs $3,000 per unit.