Nvidia stock rose about 25% on Thursday after the company reported stellar earnings and expected sales to rise to $11 billion for the three months ending in July. Wall Street forecasters estimated that sales would be about $7.2 billion for that period.
Bank of America analysts, led by Vivek Arya, said the semiconductor giant’s guidance amounts to “the largest increase” they’ve ever seen from any company, and is clearly “driven by the start of major data center investments in generative AI and large language models.” Nvidia’s graphics processors that are used in data centers to help run artificial intelligence applications are a long-term cash cow for the company.
Investors have been riding a wave of AI euphoria ever since OpenAI released ChatGPT in November and managed to attract 100 million users faster than any app in history. And while some on Wall Street have begun to question the continued power of the recent AI boom, Nvidia’s stellar earnings helped legitimize the hype in many analysts’ minds this week.
The Bank of America team raised its price target for Nvidia from $340 to $450 in a post-earnings note Thursday, arguing that the company has established itself as a “leader in artificial intelligence” and is set to soar its market value to “a trillion dollars and beyond.” “. The $450 price target represents a potential price increase of 17% from Thursday’s closing price of just over $379 per share.
Bank of America’s Vivek Arya has considered NVIDIA a “top pick” for investors since June of last year, when he argued that semiconductor stocks had been oversold by recession-wary investors. And in a research note earlier this month, Arya provided a 12-month price target of $340 for Nvidia stock, saying he believes the company’s semiconductors make it “the leader in the AI gold rush.”
However, it hasn’t always been so smooth sailing for Nvidia. Shares of the chipmaker fell nearly 70% between their previous all-time highs in November 2021 and lows in October 2022, as rising interest rates and recession fears weighed on technology and growth stocks. But since then, the AI boom has boosted Nvidia shares by more than 230%. The latest earnings only confirmed to many investors and analysts that the stock will continue to rise. According to Bank of America analysts, Nvidia is “uniquely positioned to help shift nearly $1 trillion from traditional data centers toward agile/AI-driven computing.”
To their point, Nvidia CEO Jensen Huang said on the company’s earnings call Wednesday that he is “seeing incredible demands to retool global data centers.”
Praise for Nvidia’s earnings and guidance from Wall Street was also widespread. Harlan Sur, a technology analyst at JP Morgan, raised the chipmaker’s price target from $250 to $500, signaling a potential upside of 31% in the stock since its recent close, due to “accelerating demand” for AI-dedicated data center technology. And Wedbush technical analysts Dan Ives and Matt Bryson raised their price target from $290 to $490, arguing that Nvidia’s guidance was “incredible” and shows the recent AI hype has legs.
“For any investors calling this AI bubble, we will direct them to this Nvidia quarter and especially guidance that advances our bullish thesis on AI and talks about the Fourth Industrial Revolution now on the cusp of AI,” they wrote in a note on Thursday. .
Michael Sansutera, chief investment officer at Silvant Capital Management, told the asset manager luckthat the latest batch of so-called generative AI technology, which includes chatbots like OpenAI’s ChatGPT as well as image generators like DALL-E2, is “the biggest business transformation since the Internet.”
“Nvidia’s first-quarter results and future guidance demonstrate the speed and magnitude of this market disruption,” he said.
Sansutera still cautioned that government interference and oversight of AI technology would be “more pervasive and onerous than any other technology adoption curve” and could lead to increased volatility in AI-related stocks. Some analysts have noted that Nvidia’s recent price increase has left the company in an overvalued position.
Nvidia currently trades at roughly 220 times twelve months earnings. That’s nearly 10 times higher than the tech-heavy Nasdaq Composite average. The company also trades at nearly 28 times sales, compared to an average of 4.4 times sales for the Nasdaq Composite.
“It’s a great company, an exceptional space. AI is the place to be, but the valuation is a little overstated… CNBC Thursday.