In just three short weeks, semiconductor superstar stock Nvidia (NASDAQ:NVDA) is due to report its Q4 earnings. Investors are hoping for a blowout quarter, with sales expected to more than triple to $20.2 billion, while earnings quintuple to $4.50 per share.
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Helping to keep those hopes elevated was rival semiconductor concern AMD, which reported its own blowout on Tuesday evening. Beating on both top and bottom lines, AMD proceeded to guide above consensus for the coming Q1 2024 report, sparking a whole series of price target revisions higher on Wall Street. Now the question is… can Nvidia live up to its own hype, and duplicate AMD’s success in promising even better sales and earnings to come?
Mizuho’s Vijay Rakesh, a 5-star analyst rated in the top 1% of the Street’s stock pros, thinks it can. In fact, as of today, Rakesh has decided to raise the hype meter to “11.”
In a note out Wednesday, just after AMD’s report, Rakesh published a wide-ranging report on multiple semiconductor stocks. Topping his list is Nvidia, which according to Rakesh is already “the best AI/ML play” (ML stands for “machine learning”), and “will remain the dominant force” in chips for artificial intelligence in 2024 and beyond.
Granted, AMD and Intel both have their sights set on overtaking Nvidia’s lead in AI chips, with new MI300/400 chips in the pipeline at AMD, while Intel prepares to unleash its own more colorfully named Gaudi3 and Falcon Shores chips. But Nvidia isn’t cooperating by sitting on its laurels, and giving its rivals any time at all to catch up.
To the contrary, Nvidia plans to build on its “wide moat from software optimization and proven scaling ability for AI training.” In 2024, notes Rakesh, Nvidia is scheduled to release a new B100 AI chip that will offer “5-10x [better] performance” than the company’s current H100 AI chip. And in 2025, Nvidia may release an even faster AI chip called the X100 — potentially twice as fast as the B100.
Rakesh estimates that Nvidia will do $79 billion in chips revenue just for data centers alone this year — more money than AMD and Intel are expected to collect, combined, from this fast-growing segment of the semiconductors market, as Nvidia attempts to defend its 95%-plus market share in chips tailored towards artificial intelligence functions.
Granted — that may seem like it must be a typo, because according to the consensus of most analysts polled, Nvidia’s entire revenue stream from all segments is only expected to be $59 billion this year. But here’s the thing: If you read deeper into Rakesh’s report, he also has Nvidia pegged for $100 billion in AI revenue in 2025, a year when other analysts are predicting Nvidia’s total revenues will just barely reach $91 billion. And by 2027, Rakesh has penciled in an astonishing $330 billion in AI revenue for the AI chips leader.
Other analysts think Nvidia will do closer to $120 billion in total sales that year.
It probably goes without saying that with these kinds of numbers penciled into his calculations, Rakesh thinks you should buy Nvidia stock, and has placed a $625 price target on the $615 stock.
But a word of caution is required here: First, because advising investors to pay (checks notes) 83 times earnings for a chance to score a (checks notes twice) 1.6 percentage point annual profit on Nvidia stock seems the height of folly. And second, because Rakesh seems to be saying the only way this bet will work out is if Nvidia generates sales nearly 3x the number that the rest of Wall Street expects Nvidia to generate, three years from now.
Overall, NVDA shares have a Strong Buy analyst consensus rating, a show of confidence by Wall Street’s analyst corps. The stock is selling for $624.50, and the average price target of $675.40 implies an 8% growth in the year ahead. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
