Wall Street analysts still see significant upside for Nvidia shareholders.
Nvidia (NVDA 3.37%) Excitement over artificial intelligence (AI) has swept the market, with shares soaring 745% in the 18 months ending June 30, 2024. But since that midpoint, the stock has fallen 5%, leaving some investors wondering if the window of opportunity has closed.
Wall Street has a clear answer. No, it’s not too late to buy Nvidia. Of the 64 analysts who follow the company, 94% rate it a “buy” and 6% rate it a “hold.” None of the analysts recommend selling at this time. Additionally, NVIDIA has a 12-month median price target of $150 per share. This represents a 28% upside from the current share price of $117.
Additionally, some analysts are expecting huge profits. In June, I/O Fund’s Beth Kendig estimated that NVIDIA would be worth $10 trillion by 2030. This would represent a 250% increase from its current market value of $2.8 trillion. Phil Panaro of Boston Consulting Group predicted in September that Nvidia would have a stock price of $800 by 2030. This represents an increase of approximately 585%.
Investors may find this surprising, considering Nvidia is already one of the world’s largest companies. But AI can be a once-in-a-lifetime investment opportunity, and Nvidia is perhaps the most important company for the AI economy. Here’s what investors need to know.
Nvidia investment themes span hardware, software, and services
Nvidia builds the computing industry’s most coveted graphics processing units (GPUs). A GPU is a chip that performs technical calculations faster and more efficiently than a central processing unit (CPU), allowing it to handle complex workloads such as training large language models or running artificial intelligence (AI) applications. can be accelerated.
According to analysts, NVIDIA accounted for 98% of data center GPU shipments last year, and its AI chip market share exceeds 80%. One of the reasons the company has achieved such a dominant position is the superior performance of its hardware. Nvidia chips consistently outperform competitors in the MLPerf benchmark, an objective test that evaluates AI systems across training and inference tasks.
Another reason Nvidia has achieved such a dominant position in the market is its CUDA software ecosystem. CUDA consists of hundreds of software libraries that simplify the development of GPU-accelerated applications. No other chipmaker offers anything close to CUDA, so Nvidia GPUs have emerged as the gold standard for data center accelerators.
Nvidia has strengthened its dominance in data centers by expanding into adjacent verticals. For example, the company is a market leader in networking equipment used for generative AI and recently introduced its first server CPU. Nvidia also offers subscription software and cloud services that support the development of AI applications across a wide range of domains, from recommender systems in retail to computer vision in healthcare.
So NVIDIA has an enduring competitive advantage in AI, not just because its chips are the fastest, but because it participates in so many parts of the AI economy. In the words of The Wall Street Journal’s Zoe Thomas, “NVIDIA already dominates the chip market driving the artificial intelligence boom. Now, the company is playing a growing role in the design of AI data centers. Masu.”
Nvidia is poised for rapid growth on strong demand for AI infrastructure
Grand View Research predicts that the AI accelerator market will grow at 29% annually through 2030, with overall spending on AI hardware, software, and services increasing at 36% annually during the same period. This bodes well for Nvidia and its shareholders.
In May, Toshiya Hari of Goldman Sachs wrote: “We believe NVIDIA will remain the de facto industry standard for some time given its competitive advantages across hardware and software capabilities, and the installed base and ecosystem it has built across multiple platforms.” The pace of innovation over the decades, and the pace of innovation for years to come. ”
But he’s not the only Wall Street analyst to lavish praise on NVIDIA. Wedbush Securities’ Dan Ives called the company “the cornerstone of the AI revolution.” CFRA’s Angelo Gino also believes that NVIDIA “will be the most important company to our civilization over the next decade as the world becomes increasingly AI-driven.”
With this in mind, Wall Street expects Nvidia’s adjusted earnings to grow 49% annually through fiscal 2026 (ending January 2026). This consensus makes the current valuation of 53 times adjusted earnings seem quite reasonable. Patient investors can feel comfortable buying a small position today, but should consider adding to their position in the event of a decline.
