Stocks

More Reasons to Love Nvidia Stock (NVDA)

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Driven by the market’s insatiable appetite for artificial intelligence, shares of Nvidia Corporation (NVDA) have skyrocketed 256% over the last 12 months, catapulting the chip giant among the world's most valuable companies.

Nvidia’s graphics processors that power artificial intelligence training and applications continue to leave investors in awe with breathtaking financial performances, spanning four consecutive quarters of remarkable results boosted by strong demand. With the stock now up 90% this year, compared to the 10% rise in the S&P 500 index, investors want to know if this strong can momentum continue. How much better can things get?

The company answered this question last week at its GTC developers conference in San Jose. Nvidia essentially solidified its dominance of the AI market by a series of announcements, including products and platforms that aims to solve some of the market’s biggest AI challenges. CEO Jensen Huang first announced Nvidia's next-generation chip architecture called Blackwell and related products, including the company's latest AI chip called the B200. In doing so, Huang forecasts that within five years, the emergence of "artificial general intelligence,” AGI, will arrive.

However, he qualified this by adding that it all depends on how you define the term. Most people think of AGI as software that is sentient, meaning it can have independent thought. This answer seems to suggest that AGI would be difficult to explicitly identify. He offered that AGI might be broad enough where its breadth of knowledge may span several fields and disciplines. For example, AGI software can master competence in a broad set of tests, "math tests, reading tests, reading comprehension tests, logic tests, medical exams, bar exams…GMATs, SATs, you name it, a bunch of tests.”

Huang later expanded on the definition or for AGI’s ability to master those tests better than any human being, saying, if you ask "do you think a computer could do that in five years, then the answer is probably yes.” He then added that if you ask the question about simply "general intelligence" rather than defining the ability to pass tests, the answer is not so clear cut. Wall Street, however, celebrated this new AGI category and the launch of Nvidia’s new Blackwell GPU platform, seemingly wasting no time ascribing the revenue potential for Nvidia.

Investment firm UBS now believes the company is on the brink of an "entirely new wave of demand" aided by sovereign nations. Analyst Timothy Arcuri cited increased demand from countries such as Saudi Arabia, Sweden, Japan, Korea, the United Arab Emirates and Malaysia, which were all specifically mentioned by Huang. Arcuri believes demand from these countries could result in Nvidia generating $150 billion in revenue in 2025, up 30% year over year.

"New pre-packaged and pre-trained modular AI models announced with together with Blackwell should also accelerate the distribution flywheel for [Nvidia's] AI solutions to ride alongside enterprise software," Arcuri wrote in a note last week. While he expressed concern about the company’s to beat Wall Street’s high estimates, Arcuri said any near-term weakness is an "attractive buying opportunity given what we think is still out in front of us.”

Following the event, he raised his price target on Nvidia from $800 to $1,100. "The entire framework creates a central distribution structure similar to an app store and given the vast array of companies to potentially license NVDA's AI Enterprise software ($4500/GPU/yr), monetization can add up quickly.”

To those investors who are still on the sidelines, and debating whether to enter the stock now or fear missing out on additional gains: Given the immense opportunity that still exists and now the addition of yet another AI category, the revenue potential for Nvidia continues to be breathtaking even as the company faces high expectations. As such, Nvidia stock remains a strong Buy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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