Analysts revamp Nvidia price targets as AI hype tests $2 trillion value

Nvidia  (NVDA)  shares soared in early Thursday trading, potentially adding more than $220 billion to its market value, in what would be the biggest single-day gain of all time, after the group blasted Wall Street earnings forecasts and teed up the next phase of the tech sector’s AI revolution.

Chief Executive Jensen Huang, who co-founded the group in 1993, told investors last night that the next wave of investment into artificial intelligence will “open up a whole new world of applications not possible today” while creating a market valued in the “hundreds of billions of dollars” every year.

“We started the AI journey with the hyperscale cloud providers and consumer internet companies. And now, every industry is on board, from automotive to health care to financial services, to industrial to telecom, media and entertainment,” Huang told investors after the group’s unprecedented January-quarter earnings report last night.

Jensen Huang co-founded Nvidia in 1993, a year after receiving a master’s degree from Stanford. The company is now valued at $1.7 trillion.

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Nvidia, now the world’s third-largest stock by market value, managed to top already elevated sales and earnings estimates with a fiscal-fourth-quarter update that blew past Wall Street forecasts. 

Nvidia earnings powered by data-center sales

Nvidia earned an adjusted $5.16 a share, a near sixfold increase from the year-earlier period, as revenue more than tripled to $21.1 billion.

Data-center sales, which house the group’s AI-focused chips, were a staggering 410% higher from a year earlier at $18.4 billion. The surge reflected continuing demand from cloud-service providers like Microsoft  (MSFT)  and the broader AI ambitions tied to Magnificent 7 rival Meta Platforms  (META) .

Perhaps even more impressive from an investor perspective was the amount of profit Nvidia was able to extract from its chip-making business. Fourth-quarter margins widened by more than 12 percentage points to 76%, a figure the group says will improve to 77% over the three months ending in April.

The group struck a confident tone in forecasting solid sales growth for the current quarter as well, projecting revenue in the region of $24 billion and an implied bottom line of $5.41 per share.

Related: 5 keys to Nvidia earnings — ‘The most important stock on planet earth’

“The world has reached the tipping point of [a] new computing era,” Chief Financial Officer Colette Kress told investors. “The $1 trillion installed base of data-center infrastructure is rapidly transitioning from general purpose to accelerated computing.”

“As Moore’s Law slows while computing demand continues to skyrocket, companies may accelerate every workload possible to drive future improvement in performance, TCO and energy efficiency,” she added.

Nvidia: ‘tipping point’ for new computing era

Wall Street is also racing to meet the implications of this “tipping point” in AI demand. A slew of price-target upgrades on Nvidia stock suggest it could test the $2 trillion mark over the coming weeks.

“Management continues to point to the transition from general to accelerated computing, and the transition to generative AI,” wrote Cantor Fitzgerald analyst C.J. Muse, 

Muse, who lifted his price target on Nvidia by $125 to $900 a share, called last night’s earnings “very much a Goldilocks scenario where ‘this guide was just right,’ leaving plenty of room for upside to estimates throughout the year”.

Related: Nvidia to Wall Street: Artificial intelligence is just getting started

KeyBanc Capital Markets analyst John Vinh, meanwhile, tagged a price target of $1,100 on Nvidia, the second-highest on Wall Street, noting the impending ramp of its new H200 chips and the coming launch of the B100 Blackwell. 

“We’re encouraged by these impressive results and view Nvidia as best positioned in [semiconductors] to benefit from [generative] AI,” Vinh wrote. “Revenue and EPS were guided above both consensus and our expectation, driven by continued demand.”

Bernstein analyst Stacy Rasgon added $300 to his Nvidia price target, taking it to $1,000 per share, while Goldman Sachs’s Toshiya Hari took his to $875 from $800.

Rosenblatt analyst Hans Mosesmann has set Wall Street’s highest price target at $1,400 per share.

Analysts see huge new market opportunity

Benchmark analyst Cody Acree, who added $375 to his price target, taking it to $1,000 per share, sees AI demand and Nvidia’s market-leading position lasting “well beyond our current forecast period.”

“Generative AI has kicked off a whole new technology investment cycle to build the next $1 trillion of infrastructure of AI generation factories,” Acree wrote. “Additionally, the company forecasts AI adoption will drive a doubling of the world’s data-center infrastructure installed base in the next five years and will represent an annual market opportunity in the hundreds of billions.” 

Wedbush analyst Dan Ives, a longtime Nvidia bull, was even more effusive, declaring the “AI revolution is just getting started.”

Related: Analysts unveil new Nvidia price targets as key earnings report looms

“For the elite, transformational tech stories such as Nvidia and the AI Revolution investors must see the forest through the trees to where this spending wave (and estimates) can head over the next 3 years,” Ives wrote. “We estimate $1 trillion of incremental AI spend over the next decade.”

Supply constraints, however, continue to cap some of Nvidia’s loftier ambitions for second-half revenue growth, particularly in terms of chip-on-wafer-on-substrate, or CoWoS, capacity. 

Taiwan Semiconductor  (TSM) , the world’s biggest chip contractor, has struggled to meet the surge for its high-end stacking and packing technology and has warned investors “that condition will continue probably to next year.”

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With that in mind, UBS analyst Timothy Arcuri lowered his Nvidia price target by $50, to $800 per share, even as he conceded that it “seems too soon to take a more cautious view.”

“There were a few items that could maybe suggest some slowing revenue growth on the horizon (mostly supply and [operating expense]), but we will have to see how these evolve,” he said. “”We are trimming estimates a bit to reflect some potential slowing in revenue growth.”

Nvidia shares were marked 13% higher in premarket trading to indicate an opening bell price of $761.20 each, a move that would extend the stock’s year-to-date gain to around 55%.

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