Tech companies in the U.S. and international markets are in a race to develop generative artificial intelligence (AI)-powered tools and applications. Chip giant Nvidia (NASDAQ:NVDA) is riding this generative AI wave, with its advanced chips enjoying robust demand due to their ability to support the building of applications like ChatGPT that require processing terabytes of data. NVDA shares have rallied over 191% year-to-date and several Wall Street analysts see further upside potential.
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Nvidia Poised for Robust Growth Ahead
Back in May, Nvidia surprised its investors with a very solid Q2 FY24 revenue guidance of about $11 billion, plus or minus 2%, which was over 50% higher than analysts’ consensus estimate of $7.15 billion. Surging demand for the company’s data center products is expected to drive its top-line growth.
After a “shock-and-awe” earnings report last time, Bank of America analyst Vivek Arya expects the sentiment to be “a bit more measured” with regard to Nvidia’s upcoming earnings report on August 23. The analyst expects the company’s Q2 FY24 revenue to be in line or modestly surpass its guidance of $11 billion, which reflects a 64% year-over-year growth.
Calling NVDA a top sector pick, Arya reiterated a Buy rating on the stock earlier this week, with a price target of $550.
Similarly, Mizuho analyst Vijay Rakesh highlighted Nvidia’s dominant position in the AI server market in a research report (dated July 23) on his firm’s AI outlook through 2027. While some additional incumbents could enter the market in the coming years, the analyst expects NVDA to maintain its significant market share.
Rakesh noted that AI penetration of total server shipments is currently small (he estimates it is about 1% of total shipments). That said, strong adoption could boost AI server penetration to over 10% by 2027. Currently, at about $250,000 to $300,000 average selling prices (ASPs), Rakesh expects Nvidia to ship about 100,000 AI units in 2023, resulting in a nearly $25 billion to $30 billion AI revenue opportunity.
The analyst projects that Nvidia could ship 1.5 million AI servers by 2027, creating a $300 billion opportunity at a more conservative ASP of about $200,000 per unit.
Rakesh raised his price target for NVDA significantly to $530 from $400 and reiterated a Buy rating on the stock.
Is Nvidia Stock a Buy Now?
With 30 Buys and two Holds, Nvidia earns Wall Street’s Strong Buy consensus rating. The average price target of $506.72 implies over 19% upside potential.
Conclusion
Nvidia stock has enjoyed a stellar year-to-date rally and most analysts remain bullish on the stock, with the expectation of further upside. The use of Nvidia’s advanced chips in generative AI applications is expected to fuel tremendous growth in the company’s top line in the years ahead.
