Nvidia Stock Receives Bullish Outlook from Wall Street Analysts

Nvidia Stock Has 41% Upside, According to 1 Wall Street Analyst | The Motley Fool

It's been quite the year for artificial intelligence (AI) chipmaker Nvidia (NVDA 5.22%), which has seen its stock rise more than 161% year to date. Over the last five years, Nvidia's stock is up by more than an astounding 2,560%. In doing so, Nvidia has reached a nosebleed valuation and now trades at 40 times forward earnings. Investors believe that Nvidia's stock doesn't have a ceiling right now, considering the potential of AI to disrupt life as we know it. However, one Wall Street analyst is certainly not ready to call it quits yet. He thinks Nvidia is poised for a big year ahead. Here's why. William Blair analyst Sebastien Naji initiated coverage of Nvidia on Wednesday, with an "outperform" rating and a $162 price target, implying 41% upside from Nvidia's stock price of roughly $115 on Wednesday morning. Naji's thesis is that the market has yet to price in Nvidia's total addressable market for the broader semiconductor market and is currently only considering the total addressable market (TAM) from graphic processing units, which is Nvidia's bread and butter. "Nvidia's technical differentiation extends beyond building state-of-the-art processors to include fully integrated systems," Naji wrote in his initiation coverage. "Specifically, Nvidia has built a deep software ecosystem ... and developed core competencies in networking (through its acquisitions of Mellanox and Cumulus), systems engineering, and supply chain management." Specifically, Naji only sees a TAM of about $100 million for graphic processing units. But the TAM for the broader semiconductor could be eight times bigger, he estimates, while the TAM for cloud services could be 16 times bigger. While I would agree that we don't yet know the potential of AI, I do start to worry about stocks with these huge valuations because the margin for error becomes very narrow. Also, estimating the size of TAMs and what specific companies can capture is not easy. Long-term shareholders can certainly buy Nvidia, but I wouldn't be surprised to see a pullback or some volatility in the near term.

There's 'Still Room' on Nvidia Bandwagon, Analyst Says

All but one of the analysts surveyed by Visible Alpha have a buy rating for Nvidia. Nvidia's (NVDA) share price may have already more than doubled in 2024, but analysts at William Blair say it isn't too late for investors to get in on the fun. The firm initiated coverage of the semiconductor titan with an "outperform" rating on Wednesday, declaring there's "still room on this train." William Blair notes Nvidia's data center revenue is expected to more than double in fiscal 2025 after tripling in fiscal 2024. The firm sees Nvidia as the clear frontrunner in the artificial intelligence (AI) space with as much as a one- to two-year lead over its competitors. For that reason, Nvidia's GPUs and AI systems should continue to drive industry-leading revenue and earnings growth, the firm said. After Nvidia shares slumped following the company's second-quarter earnings last month, Bank of America called out an "enhanced buy opportunity," and Bernstein analysts recently called the company the "best way to play AI." All but one of the 23 firms surveyed by Visible Alpha hold a "buy" rating on Nvidia, with an average price target of $151.73. Nvidia shares slipped less than 1% Wednesday afternoon to $114.95, continuing a slight pullback this week after the stock popped last week on encouraging comments from Chief Executive Officer (CEO) Jensen Huang.

Nvidia gets a new bull on Wall Street as William Blair starts at buy By Investing.com

NVIDIA (NVDA) gained a new bull on Wall Street as William Blair initiated coverage of the stock with an Outperform rating, citing the company's leadership in parallel computing and its dominant position in the AI industry. According to the firm, "Nvidia (NASDAQ:NVDA) has a long and storied history of designing parallel computing systems," which has propelled the company into high-growth markets like gaming, automotive, and high-performance computing (HPC). Analysts noted that Nvidia's data center revenue skyrocketed by 217% in fiscal 2024 and is expected to grow by 132% in fiscal 2025, reaching over $110 billion, up from just $15 billion in fiscal 2023. William Blair explains that a key factor behind Nvidia's growth is its system-level approach, which has expanded its total addressable market (TAM) from around $100 billion in GPUs to the broader $800 billion semiconductor and $1.6 trillion cloud services markets. The note highlights Nvidia's deep software ecosystem, specifically CUDA, which has over 5 million active developers, as well as the company's strategic acquisitions, such as Mellanox and Cumulus, which have strengthened its networking and systems engineering capabilities. "The rapid rise in demand for AI solutions has driven Nvidia's gross margins to 74% in fiscal 2024, well above its 50%-60% historical range," says the firm. "Part of this improvement is related to Nvidia's technical aptitude -- we estimate a one- to two-year lead over competitors in AI accelerator performance." The firm also attributes this margin growth to Nvidia's technical lead in AI performance and its integrated systems, like the DGX product line, which layers in key intellectual property across the entire IT stack. With shares trading at 30 times P/E and 32 times EV/FCF based on 2025 estimates, William Blair sees further upside, citing Nvidia's strong revenue and earnings growth. However, analysts caution that risks remain, including exposure to China, semiconductor cyclicality, and "key man risk" with CEO Jensen Huang.