The incredible rise of Nvidia (NASDAQ:NVDA) has been one of the biggest stories of the past two years. Dominating the AI hierarchy, NVDA holds a seemingly unassailable position atop the rapidly expanding industry, commanding around 90% of the data center market.
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NVDA has ridden these massive gains to a valuation north of $3 trillion, rewarding investors with returns of over 630% over the past two years.
Still, as philosophers throughout history remind both the comfortable and the afflicted, nothing lasts forever. In short, customer needs alter, regulatory environments change, and competitors adapt. Regarding the particular case of NVDA, each one of these developments has the potential to dampen revenues, profits, and share prices.
While acknowledging the challenges facing Nvidia, investor Uttam Dey believes that the AI chip giant still has plenty of growth to offer investors.
“Nvidia continues to be a high-quality, high-growth company that makes one of the most innovative, most sought-after chip products in the world,” Dey opined.
Dey is fully aware that the needs of the megatech companies are moving away from computing power, and are instead focusing more of their efforts on increasing efficiencies. The investor explains that this will decrease the demand for Nvidia’s GPUs, with obvious implications for the company’s bottom-line.
“Nvidia will no longer be able to produce the alpha-like returns it had generated for its investors over the past two years,” Dey asserts.
Still, that does not mean that growth will be stagnant, adds the investor, noting that Nvidia has projected revenue growth of 55-60% through FY 2026 and a CAGR of 61% through FY 2027. Expecting selling prices to remain stable, Dey believes that Nvidia will continue to enjoy operating margins that will remain above 60%.
Based on these projections, Dey estimates Nvidia’s forward valuation multiple at 33x its 2027 earnings.
This outlook reinforces Dey’s confidence in NVDA’s investment appeal, leading him to assign the stock a Buy rating. (To watch Uttam Dey’s track record, click here)
Wall Street, similar to Dey, continues to be fully smitten with NVDA. Its 36 Buy and 3 Hold recommendations give the stock a Strong Buy consensus rating. The company’s 12-month average price target of $176.86 implies a ~26% upside potential for the year ahead. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
