Nvidia (NASDAQ: NVDA) has been in scintillating form in the stock market in 2024, gaining nearly 180% at the time of writing. This is due to the robust growth the company has achieved in recent quarters due to strong demand for its graphics cards deployed in artificial intelligence (AI) servers.
The average price target for the next twelve months of $150 (according to 64 analysts covering Nvidia) indicates that there is not much upside potential, as it points to gains of only 9% from current levels. However, Bank of America recently raised their price target on Nvidia from $165 to $190, which would translate to a 38% gain from current levels.
Let’s take a look at why that was the case and see if this high-flying semiconductor stock could soar above consensus estimates and deliver stronger gains in the future.
Bank of America analysts have raised their price target on Nvidia due to the company’s dominant position in the AI chip market. They believe the chipmaker could continue to control an estimated 80 to 85 percent share of this space, which puts the company in a great position to capitalize on a $400 billion market opportunity.
Bank of America’s optimistic stance also stems from the arrival of Nvidia’s new generation of Blackwell processors, as well as a stellar earnings report from the key vendor TSMC and Nvidia CEO Jensen Huang’s claim that demand for the upcoming Blackwell cards is “insane.” It’s worth noting that Nvidia management pointed out during its August earnings conference call that it’s on track to sell several billion dollars worth of Blackwell processors in the fourth quarter of the current fiscal year.
More importantly, demand for Blackwell chips is expected to exceed supply by 2025. That won’t come as a surprise, as multiple cloud computing giants are lining up to deploy Nvidia’s Blackwell processors. Nvidia management pointed this out in March this year Amazon Web services, Dell Technologiesgoogle, Meta, MicrosoftOpen AI, Oracle, Teslaand xAI are among the many companies expected to adopt the Blackwell platform.
That’s not surprising given the huge jump in performance that Nvidia’s Blackwell platform is expected to deliver compared to previous-generation Hopper chips. More specifically, Nvidia promises four times higher AI training performance and thirty times higher AI inference compared to Hopper. In fact, Nvidia claims that Blackwell can train large language models (LLMs) at “up to 25x less cost and energy consumption than its predecessor.”
Moreover, with the arrival of Blackwell, Nvidia will increase its technological lead in the AI chip market. Therefore, it won’t be surprising to see the company maintain 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.
Bank of America predicts that the size of the AI accelerator market could rise to $280 billion by 2027, before heading north of $400 billion in the longer term. Nvidia has generated nearly $49 billion in revenue from its data center business this year. Of that, $42 billion comes from sales of computer chips such as AI graphics cards, while the rest comes from sales of networking solutions.
At this rate, Nvidia could end fiscal year 2025 (which ends in January 2025) with $84 billion in revenue from sales of its AI accelerators. Assuming Nvidia captures even 75% of the AI accelerator market by 2027 (which coincides with fiscal year 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 leap from the AI accelerator revenue Nvidia will report this fiscal year.
Add in the potential revenue Nvidia could generate from sales of its AI networking chips over the next five years, and there’s a good chance the company’s revenue will exceed analyst expectations.
NVDA revenue estimates for current fiscal year data based on YCharts.
At the same time, the long-term revenue of $400 billion from AI chips suggests there may be more room for Nvidia to grow its AI revenues in the future. All of this explains why analysts expect Nvidia’s profits to grow at an impressive 57% annual rate over the next five years. The market could reward such solid earnings growth with higher share prices, both in the short and long term.
As such, this AI stock appears 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, as it currently trades at an attractive 35 times forward earnings, which isn’t that expensive considering that its Nasdaq-100 index has a forward earnings multiple of 30 (using the index as a benchmark for technology stocks).
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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, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, 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 holds 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 to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Nvidia Shares Could Rise Another 38%, According to 1 Wall Street Firm, originally published by The Motley Fool
