Is Nvidia Wall Street's New AI Darling?
Nvidia's (NVDA) recent earnings report beat the high predictions of Wall Street once again. During the quarter, Nvidia disclosed adjusted earnings per share (EPS) amounting to $5.16, with $22.1 billion in total revenue. Analyst projections had anticipated EPS to be $4.60, with revenue hovering around $20.4 billion. These figures indicate substantial growth compared to the previous year's corresponding period, with earnings skyrocketing by over 486% and revenue climbing by more than 262%.
Wall Street reacted overwhelmingly positively, with a bunch of elevated price targets and an overall bullish outlook on the stock that experienced double-digit growth on Thursday the 22nd. Following the report, the median price target on the stock climbed by 19%.
Nvidia's steaming hot earnings report also propelled European stock to close at an all-time high on Thursday. Led by its tech index, the Stoxx Europe 600 climbed 0.8% to a record 495.10. Let's get a keener understanding of the Nvidia effect on the AI ecosystem's market value from the viewpoint of several Wall Street experts.
A little about Nvidia
Founded in 1993 by Jensen Huang, Chris Malachowsky, and Curtis Priem, Nvidia Corporation has emerged as a global leader in visual computing technologies and artificial intelligence. Initially focusing on graphics processing units (GPUs) for gaming, Nvidia has expanded its reach into various sectors, including data centers, automotive, professional visualization, and edge computing.
The company's GPUs are renowned for their exceptional performance in rendering complex graphics, powering immersive gaming experiences, and accelerating AI and scientific computing tasks. Nvidia's innovations, such as the CUDA parallel computing platform and Tensor Core architecture, have propelled it to the forefront of AI development and GPU computing.
Over the years, Nvidia has forged strategic partnerships with industry giants like Microsoft, Google, and Audi, cementing its position as a key player in shaping the future of computing. From a financial perspective, Nvidia's stock price has experienced significant growth, reflecting investors' confidence in its technological prowess and expanding market opportunities.
Despite occasional market fluctuations and industry challenges, Nvidia's stock has demonstrated resilience, often outperforming broader market indices and rewarding long-term investors with substantial returns. As Nvidia continues to challenge the boundaries of innovation and capitalize on emerging trends like AI, autonomous vehicles, and cloud computing, it remains a formidable force in the tech landscape with a promising outlook for future growth.
What do the Wall Street experts think about Nvidia?
In a recent article in Yahoo Finance, reporter and writer Josh Schafer shared these Wall Street analyst's assessments of Nvidia. Here is a summary of their comments.
Toshia Hari from Goldman Sachs maintains a Buy rating on Nvidia with a revised price target of $875, up from $800. Hari notes that Nvidia has surpassed expectations again, particularly with its Data Center segment driving significant growth. Looking forward, Hari anticipates sustained expansion in Data Center revenue for FY2025, fueled by continued investment in Gen AI infrastructure by major communication service providers and consumer internet companies, alongside increased adoption of AI across various industries and even sovereign states.
Vedvati Shrotre of Jefferies also maintains a Buy rating on Nvidia, raising the price target to $780 from $610. Shrortre highlights Nvidia's pivotal role as the dominant AI ecosystem provider, drawing parallels to past eras dominated by vertically integrated companies, including IBM and Apple. Shrotre emphasizes the underestimation by many investors of Nvidia's extensive investment in its ecosystem, which has solidified its position as the preferred platform for AI workloads. Shrotre believes that Nvidia's ecosystem advantage translates into a self-reinforcing cycle, with software developers and platform suppliers increasingly embracing Nvidia for AI applications.
Vivek Arya, from Bank of America, maintains a Buy rating on Nvidia with an adjusted price target of $925, up from $800. Arya highlights a significant revelation from Nvidia's earnings call: the substantial contribution of AI inference, accounting for nearly 40% of the AI computing mix in FY24/CY23. This indicates a shift towards revenue-bearing AI, which enhances competitiveness, particularly as Nvidia already dominates AI training. Arya also points out positive aspects such as tight supply conditions, reduced dependence on China (with only a mid-single-digit percentage of data center sales attributed to the region), a growing pipeline, and increasing sovereign demand for AI applications.
Timothy Arcuri of UBS Investment Bank, also maintaining a Buy rating, adjusts the price target to $800 from $850. Arcuri acknowledges some potential signals of slowing revenue growth, primarily related to supply constraints and operating expenses. However, given the early stages of AI development, especially in sectors like healthcare and drug discovery, and Nvidia's position as the global AI platform, Arcuri refrains from adopting a more cautious stance. Although estimates are adaptable to possible revenue growth moderation, the Buy rating remains unchanged.
With an overweight rating, Harlan Sur of JPMorgan revises the price target to $850 from $650. Sur underscores Nvidia's forecast of ongoing supply-demand imbalances until CY24, dispelling concerns of inventory corrections in the latter half of the year. Sur is optimistic about sustained growth beyond CY25, driven by the transition to accelerated computing, the proliferation of generative AI applications, and the expansion of sovereign AI initiatives. Sur also cites examples of robust AI monetization from Nvidia's customers, such as ServiceNow's largest-ever net-new annual contract value contribution and the rapid growth of Microsoft 365 Copilot.
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Atif Malik, an analyst from Citi, maintains a Buy rating on Nvidia with a price target of $820. Malik highlights Nvidia's anticipation of continued strong demand for AI, surpassing available supply throughout the year. Despite a sharp decline in China due to US restrictions, Malik notes that inference sales accounted for 40% of data center sales last year. Nvidia also expects the data center infrastructure installed base of $1 trillion to double over the next five years. While year-over-year data center comparisons could present challenges, Malik finds the long-term earnings potential attractive, particularly in light of Citi's projection of a $200 billion compute total addressable market (TAM) by 2027.
Gil Luria of DA Davidson holds a Neutral rating on Nvidia reflecting a price target of $620. Luria acknowledges that FY2025 will likely be a strong year for Nvidia but expresses concerns about sustained growth beyond that period. Messaging from major customers indicates an acceleration in spending to meet current demand, but Luria speculates that this spending may taper off once demand stabilizes. Luria forecasts a potential sequential decline in Nvidia's data center business over the next 4-6 quarters, leading to lower estimates for FY2026 and FY2027.
Ruben Roy from Stifel maintains a Buy rating on Nvidia with a revised price target of $910, up from $865. Roy finds Nvidia's commentary on revenue diversification noteworthy, particularly its expanding presence in industries and regions beyond traditional markets. Roy believes this diversification will persist as the return on investment for AI accelerates. Stifel continues to view Nvidia as the primary beneficiary of AI infrastructure deployments in the coming years, with strong demand expected to outpace supply in the medium term.
Ananda Baruah of Loop Capital also maintains a Buy rating on Nvidia, with an ambitious price target of $1,200. Baruah sees a substantial opportunity for Nvidia, projecting a $150 billion GPU market in CY2024. Baruah's analysis suggests higher figures for high-end Data Center GPUs than street estimates, indicating potential for significant growth in enterprise and data center GPU sales.
How could you invest in Nvidia's earnings success by paying $600 a share?
Investing in Nvidia's earnings success without purchasing the company's stocks directly at over $600 a share can be achieved through several alternative investment strategies:
1. Fractional Shares: Many brokerage platforms offer the option to buy fractional shares of companies, including Nvidia. Instead of purchasing full shares, you can invest a specific dollar amount, allowing you to own a portion of Nvidia stock commensurate with your investment budget.
2. Exchange-Traded Funds (ETFs): Consider investing in ETFs that include Nvidia within their holdings. ETFs are investment funds that hold.
3. Pick stocks positively correlated to Nvidia stock , preferably in the same sector. You can use a stock screener for this purpose. Also, you can invest in companies with supply contracts with Nvidia ( I plan to write an entire article about this tactic).
Final Note
It's apparent Nvidia is the battlefield-tested Wall Street favorite going forward in AI stocks. Whether the company keeps its status depends on how well it handles the flood of new competitors, acquisition offers, or market shifts. Either way, Nvidia definitely a stock to track in 2024.
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Impressive results from Nvidia indeed; their consistent performance is a testament to the robust potential of AI in the market.