Nvidia (NASDAQ:NVDA) is at the center of the current AI arms race, as cloud providers, hyperscalers, and enterprises compete to take advantage of the massive productivity gains that this groundbreaking technology could bring.
No company is better positioned to capitalize on this shift than Nvidia, which has built an advantage through its leadership in manufacturing the advanced chips that power AI innovation.
Joining the bulls is William Blair analyst Sebastian Nagy, who shares his optimistic outlook for Nvidia’s future.
“The rise of AI has propelled parallel computing to the forefront of the tech industry, causing a surge in demand for the company’s GPUs and parallel computing stack. As evidence, Nvidia’s data center revenue is expected to grow 217% in fiscal 2024 and 132% in fiscal 2025 to exceed $110 billion in revenue (a significant increase from $15 billion in fiscal 2023),” Nagy explained.
Nvidia’s background as a pioneer in GPU-based parallel computing laid the foundation for its current dominance in AI, but as Naji points out, the company’s “technical differentiation goes beyond just building cutting-edge processors.”
That’s because NVIDIA quickly realized that continued improvements in computing performance required a broader, systems-level approach. The company expanded beyond chip design to developing comprehensive infrastructure systems that would help it capture an ever-increasing portion of IT and data center spending.
Meanwhile, the combination of technology leadership and advancements in the infrastructure stack have driven robust gross margin and EPS growth. For example, gross margin growth for fiscal year 2024 is reaching 74%, well above the 50%-60% range it has achieved historically.
The good news, according to Nagy, is that the strong performance is likely to continue: Nvidia maintains “competitive advantages” in both hardware (such as the Rubin chip, due out next year) and software, so Nagy believes growth should be “sustainable for several years.”
In terms of valuation, Naji acknowledges that the company’s shares are trading at a premium to its peer median, but believes the company’s technological leadership and first-mover advantage in the GPU space and its system-level approach justify the valuation.
So, ultimately, what does this mean for investors? Nagy initiated his coverage of Nvidia with an Outperform (i.e. Buy) rating, even though he doesn’t have a fixed price target in mind. (To watch Nagy’s track record, click here)
Nagy is one of 39 NVDA bulls on Wall Street, and with the addition of three holds, the stock has earned a consensus rating of “Strong Buy.” The average target is currently $153.24, suggesting a 33% upside over the 12-month period. (See Nvidia stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is extremely important that you conduct your own analysis before making any investment.
