Nvidia stock has much more room to run up its all-time high share price set this week, argue Bank of America analysts, who just meaningfully upped their price target for the artificial intelligence poster child Nvidia due to a highly favorable growth horizon.
Key Facts
- The Bank of America group led by Vivek Arya raised their Nvidia target from $165 to $190, indicating 37% upside from Nvidia’s $138 share price Friday, a fresh weekly closing high.
- Arya and company argued a “generational opportunity” is still ahead for Nvidia in AI accelerators, the full-stack semiconductor systems necessary for generative AI applications of which Nvidia captures roughly 80% of the market as its big-ticket customers like Alphabet, Meta and OpenAI invest heavily in Nvidia’s graphics processing units (GPUs) to train large-language models.
- Bank of America projects the total addressable market for this AI technology will grow from $45 billion in 2023 to $117 billion this year to $363 billion by year’s end, while Nvidia maintains a 75% market share, translating to a whopping $272 billion in AI computing revenues for Nvidia by 2030.
- For reference, Apple generated $204 billion of revenue from iPhones in 2023.
- Other positive catalysts named by Bank of America include significantly higher profit margins than its peers, with its free cash flow margin of roughly 50% over the next two years forecasted at twice as much as the average of the other five trillion-dollar American technology giants, and its “underappreciated” income streams outside of selling its custom GPUs, including lucrative partnerships with consultancy Accenture and Microsoft.
Big Number
$4.7 trillion. That’s the Nvidia market capitalization implied by Bank of America analysts’ $190 price target. That’s much higher than the market value of any public company ever, a title held by Apple at $3.6 trillion.
Key Background
Nvidia is the world’s second-most valuable company with a $3.4 trillion market cap. That’s a far cry from the roughly $10 billion valuation it held a decade ago and the sub-$300 billion market cap it boasted just two years ago. Nvidia’s stock market ascension followed the late 2022 release of OpenAI’s ChatGPT generative AI chatbot, which inspired significant earnings growth for the company as Nvidia’s graphics processing units are at the core of these AI applications. Nvidia’s sales and net income were 350% and 2,400% higher during the quarter ending in July than they were during 2022’s comparable period, respectively. Originally a company known for its role in video game graphics, Nvidia is still led by its founding CEO Jensen Huang, who is the 11th-richest person in the world thanks to his 3% stake in the company, according to Forbes’ calculations. Common valuation metrics indicate Nvidia stock is expensive relative to its fundamentals – it has the second-highest price-to-sales ratio, which compares a company’s market cap to its last 12-month revenues, on the S&P 500, but many remain bullish thanks to what Huang describes as “emotional” and “insane demand for Nvidia’s products.
This article was originally published on forbes.com and all figures are in USD.
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