Nvidia (NASDAQ: NVDA) has been in scintillating form on the stock market in 2024, reaching gains of nearly 180% as of this writing. This is due to the robust growth that the company has been clocking in recent quarters on account of the strong demand for its graphics cards deployed in artificial intelligence (AI) servers.
The stock's median 12-month price target of $150 -- as per 64 analysts who cover Nvidia -- indicates that there isn't much upside on offer as it points toward gains of just 9% from current levels. However, Bank of America recently raised their price target on Nvidia from $165 to $190, which would translate into a 38% gain from current levels.
Let's see why that was the case and check if this high-flying semiconductor stock could rise above consensus estimates and deliver stronger gains going forward.
Strong market share and next-generation processors are tailwinds for Nvidia
Bank of America analysts have raised their price target on Nvidia because of the company's dominant position in the AI chip market. They believe that the chipmaker could continue commanding an estimated 80% to 85% share of this space, which puts the company in a terrific position to capitalize on a $400 billion market opportunity.
Bank of America's bullishness also stems from the arrival of Nvidia's new generation of Blackwell processors, as well as a terrific earnings report from key supplier TSMC and Nvidia CEO Jensen Huang's claim that the demand for its upcoming Blackwell cards is "insane." It is worth noting that Nvidia management pointed out on the company's August earnings-conference call that it is on track to sell several billion dollars' worth of Blackwell processors in the fourth quarter of the current fiscal year.
More importantly, the demand for Blackwell chips is expected to be higher than their supply in 2025. That won't be surprising as multiple cloud-computing giants are in line to deploy Nvidia's Blackwell processors. In March this year, Nvidia management pointed out that Amazon Web Services, Dell Technologies, Google, Meta, Microsoft, OpenAI, Oracle, Tesla, and xAI are among the many companies expected to adopt the Blackwell platform.
That's not surprising considering the huge leap in performance that Nvidia's Blackwell platform is expected to deliver as compared to the prior-generation Hopper chips. More specifically, Nvidia is promising a 4 times increase in AI training performance and a 30 times jump in AI inference as compared to Hopper. Even better, Nvidia claims that Blackwell can train large language models (LLMs) at "up to 25x less cost and energy consumption than its predecessor."
Moreover, Nvidia is set to extend its technology lead in the AI chip market with the arrival of Blackwell. That's why it won't be surprising to see the company maintaining a strong share of the AI chip market as Bank of America analysts predict. This should ideally pave the way for robust long-term growth for Nvidia.
Better-than-expected growth points toward more upside
Bank of America forecasts that the size of the AI accelerator market could jump to $280 billion in 2027 before heading north of $400 billion in the longer run. Nvidia has generated almost $49 billion in revenue from its data-center business this year. Of that, $42 billion is from sales of compute chips such as AI graphics cards, while the remaining was from sales of its networking solutions.
At this pace, Nvidia could end fiscal 2025 (which will end in January 2025) with $84 billion in revenue from sales of its AI accelerators. Assuming Nvidia controls even 75% of the AI accelerator market in 2027 (which will coincide with its fiscal 2028), it could generate $210 billion in revenue from this space (based on BofA's $280 billion market-size estimate). That would be a huge jump from the AI accelerator revenue that Nvidia is set to report in the current fiscal year.
Throw in the potential revenue that Nvidia could generate from sales of its AI networking chips over the next five years, and there is a solid possibility of the company's top line exceeding analysts' expectations.
NVDA Revenue Estimates for Current Fiscal Year data by YCharts.
At the same time, the $400 billion long-term revenue opportunity in AI chips suggests that there may be more room for Nvidia to grow its AI revenue in the future. All this explains why analysts are expecting Nvidia's bottom line to increase at an impressive annual rate of 57% for the next five years. The market could reward such solid earnings growth with more stock upside both in the short and the long run.
As such, this AI stock seems well placed to approach Bank of America's updated price target before heading higher in the future. That's why investors looking to add an AI stock to their portfolios would do well to buy Nvidia since it is trading at an attractive 35 times forward earnings right now, which is not all that expensive considering that the Nasdaq-100 index has a forward-earnings multiple of 30 (using the index as a proxy for tech stocks).
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $860,447!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 21, 2024
Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Bank of America, Meta Platforms, Microsoft, Nvidia, Oracle, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
