Nvidia is going for ‘$1 trillion and more,’ says BofA

Nvidia The stock rose nearly 25% Thursday after the company announced standout earnings and forecast its sales would rise to $11 billion for the three months ending in July. Wall Street forecasters have estimated sales would be roughly $7.2 billion for that period.

Bank of America Analysts, led by Vivek Arya, said the semiconductor giant’s guidance amounts to the “biggest increase” they’ve seen from a company and is clearly “driven by the start of major data center investments in generative AI and large-scale language models.” Analysts hail Nvidia’s graphics processors used in data centers to help power artificial intelligence applications as a long-term cash cow for the company.

Investors have been riding a wave of AI euphoria ever since OpenAI released its AI chatbot ChatGPT in November and was able to pull 100 million users faster than any app in history. And while some on Wall Street have started QUESTIONS the staying power of the recent AI boom, Nvidia’s stellar earnings helped legitimize the hype in the minds of many analysts this week.

The Bank of America team raised its price target for Nvidia from $340 to $450 in a post-earnings note on Thursday, arguing that the company is establishing itself as an “AI leader” and the cap in the market is set to rise to “$1 trillion and beyond.” The $450 price target represents a potential 17% upside from Thursday’s closing price of just over $379 per share.

Bank of America’s Arya holds Nvidia as a “top pick” for investors since June of last year, when he argued that semiconductor stocks were oversold by recession-wary investors. And in a research note earlier this month, Arya gave a $340 12-month price target for Nvidia stock, saying he believes the company’s semiconductors make it “picks and shovels leader in the AI ​​gold rush.”

It hasn’t always been smooth sailing for Nvidia, however. The chipmaker’s shares fell nearly 70% between the first high in November 2021 and the October 2022 trough, as rising interest rates and fears of a recession weighed on technology and growth stocks. But since then, the AI ​​boom has boosted Nvidia shares by 230%. And the latest earnings only confirm for many investors and analysts that the stock will continue to rise. Nvidia is “uniquely positioned to help transform nearly $1 trillion in traditional data centers toward accelerated/AI-driven computing,” according to Bank of America analysts.

To their point, Nvidia CEO Jensen Huang said in the company’s earnings call on Wednesday that he “sees incredible orders to transform the world’s data centers.”

Praise for Nvidia’s earnings and guidance from Wall Street was also widespread. JP Morgan tech analyst Harlan Sur raised his price target for the chipmaker from $250 to $500, implying a potential 31% upside to the stock from its recent close, due to “accelerating of demand” for AI-dedicated data center technology. And Wedbush tech analysts Dan Ives and Matt Bryson raised their price target from $290 to $490, arguing that Nvidia’s guidance is “jaw-dropping” and that recent AI hype has legs.

“For any investor who calls this an AI bubble, we point to this quarter at Nvidia and especially the guidance that reinforces our strong thesis around AI and speaks to the fourth Revolution Industry is now at AI’s doorstep,” they wrote in a note on Thursday.

Michael Sansoterra, chief investment officer of asset manager Silvant Capital Management, said luck that the latest batch of so-called generative AI tech, which includes chatbots like OpenAI’s ChatGPT as well as image generators like DALL-E 2, is “the biggest business revolution since the internet. ”

“Nvidia’s Q1 results and guidance going forward demonstrate the speed and magnitude of this market disruption,” he said.

However, Sansoterra warns that government intervention and oversight for AI tech will be “more omnipresent and burdensome than any other technology adoption curve” and could lead to increased volatility in related stocks. in AI. And some analysts have THE audience that Nvidia’s recent price hike has left the company with a high valuation.

Nvidia currently trades at nearly 220 times trailing 12-month earnings. That’s almost 10 times higher than the tech-heavy average Nasdaq Composite. The company also trades at roughly 28 times sales, compared to an average of 4.4 times sales for the Nasdaq Composite.

“It’s a great company, amazing space. AI is the place to be, but the valuation is low…You just have to be careful,” Sarat Sethi, DCLA managing partner and portfolio manager, told CNBC Thursday.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *