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Analysts at Bank of America argue that Nvidia stock has much more room to beat the all-time high it set this week, citing a highly favorable growth period as a target for artificial intelligence leader Nvidia. The company has just raised its stock price meaningfully.
Nvidia CEO Jensen Huang
AFP (via Getty Images)
important facts
Vivek Arya’s Bank of America Group raised its target on NVIDIA to $190 from $165, marking a 37% increase from Friday’s $138 share price and a new weekly high. did.
Arya and others argued that for NVIDIA, a “generational opportunity” in AI accelerators still awaits. AI accelerators include NVIDIA Alphabet, Meta, and OpenAI are investing heavily in Nvidia’s graphics processing units (GPUs) to train large language models.
Bank of America predicts that the total market size for this AI technology will grow from $45 billion in 2023 to $117 billion this year and $363 billion by the end of the year. Meanwhile, Nvidia maintains a 75% market share, translating to a whopping $272 billion in AI computing revenue. Nvidia by 2030.
For reference, Apple generated $204 billion in revenue from iPhone in 2023.
Other positive factors cited by Bank of America include significantly higher profit margins compared to peers, with the company’s free cash flow margins at about 50% over the next two years, It is expected to be twice the average for U.S. dollar-sized tech giants. And there are other “underappreciated” sources of revenue outside of custom GPU sales, such as lucrative partnerships with consultancy firm Accenture and Microsoft.
big number
4.7 trillion dollars. This is NVIDIA’s market capitalization implied by Bank of America analysts’ $190 price target. This far exceeds the market value of previously listed companies, the $3.6 trillion entitlement held by Apple.
Main background
Nvidia is the second most valuable company in the world with a market capitalization of $3.4 trillion. That’s a far cry from the company’s valuation of about $10 billion a decade ago and its market capitalization of less than $300 billion just two years ago. Nvidia’s stock market rally followed the late 2022 release of OpenAI’s generative AI chatbot ChatGPT. This has driven significant revenue growth for the company, as Nvidia’s graphics processing units are at the core of these AI applications. Nvidia’s revenue and net income for the quarter ending in July increased by 350% and 2,400%, respectively, compared to the comparable period in 2022. Nvidia, a company originally known for video game graphics, is now owned by founding CEO Jensen Huang, who owns a 3% stake in the company and is the 11th richest person in the world, according to Forbes calculations. But it is led. Common valuation metrics indicate that NVIDIA stock is expensive relative to its fundamentals. NVIDIA stock has the second-highest price-to-sales ratio (which compares a company’s market capitalization to its trailing 12-month earnings) in the S&P 500, which is why many remain bullish. Huang describes it as “emotional” and “insane demand” for Nvidia products.
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