Friday Feb 23 2024 14:59
5 min
Nvidia Corp.'s remarkable performance over the past year has been such that Wall Street seems to have adjusted its expectations, looking past metrics like the company's data-center revenue increasing fivefold in the recent quarter.
Nvidia's consistently impressive performance has led investors to question the sustainability of its growth. However, the double-digit spike in Nvidia shares on Thursday appears to suggest that Wall Street is content with the company's long-term prospects.
The 16.4% surge in the Nvidia stock price on Thursday, which boosted its market value by $277 billion, marked the largest single-day gain for any U.S. company, surpassing Facebook's Meta Platforms' previous record of $204.5 billion, set on February 2.
This rally set a record high for Nvidia stock at $785.38, showing its strongest one-day percentage gain since May 23, 2023.
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Amid discussions about the sustainability of Nvidia's growth, Bernstein analyst Stacy Rasgon highlighted the company's promising future in the data-center sector, suggesting significant potential for further growth.
“[O]ver the longer term the company not only sees accelerated compute ramping through the current $1 trillion of installed data-center infrastructure but also sees that installed base doubling to $2 trillion over the next five years,” Rasgon wrote in a note to clients cited by MarketWatch.
That expansion of the installed base “feels almost scary but if true would suggest absolutely mammoth growth potential still to come,” he continued.
Nvidia’s stock story “still feels like it has legs,” Ragson wrote, while adding that the company’s opportunity in the data-center business “is enormous, and still early, with material upside still possible.”
Rasgon upgraded his Nvidia stock rating to "Outperform" and increased his price target to $1,000.
Similarly, TD Cowen's Matthew Ramsay praised the "seemingly insatiable” demand for Nvidia's AI solutions, indicating a potential $80 billion run rate for the data-center business.
“We continue to believe the industry is in the early innings of two transformational paradigm shifts toward accelerated computing and generative [artificial intelligence] — with Nvidia firmly positioned as the leader in both,” Ramsay wrote.
Ramsay found optimism in the company's statement that roughly 40% of its data-center income was generated from inference applications — an aspect of AI where models are used to make predictions from data.
“That nearly half of Nvidia’s data-center revenues support inference workloads is yet another proof point that [large-language-model] inference will be a major demand driver for Nvidia and others’ accelerators going forward,” he wrote.
Ramsay maintained an Outperform rating on Nvidia shares and boosted his target price to $900 from $700 late Wednesday.
C.J. Muse from Cantor Fitzgerald applauded Nvidia's "Goldilocks" approach, describing the company's outlook as "just right" and highlighting the "plenty of room for upside to estimates throughout the year."
With Nvidia projecting that demand will exceed supply this year, there's an anticipation of consistent revenue growth throughout the period. Muse also pointed out that company leaders "suggested expected shortages for new products launching, including H200, Spectrum-X, and B100," reinforcing the expectation that growth will persist into [calendar 2025].
On Wednesday evening, Muse increased his price target for Nvidia to $900 from $775, considering this new goal "arguably conservative" and based on a 32-fold multiple of his projected $28 adjusted earnings per share for the next year.
Nvidia stock closed up 16.4% at $785.38 on Thursday, propelling multiple benchmark stock indices, such as Japan’s Nikkei 225 index, to record highs. The Dow and S&P 500 were also buoyed by the rise, and more growth appears to be on the cards, with Nvidia shares up 2.2% in premarket trading on Friday.
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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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