One of the big debates among Wall Streeters lately has been about how far that limit should be Nvidia (Nasdaq: NVDA) Inventory can be run. A new report from an analyst leads the charge on how far the stock has risen.
Susquehanna Senior Semiconductor Analyst Chris Rowland only He raised his company's target price From $145 to $160 per share. That would represent a gain of more than 20% from recent levels to a market cap of $3.94 trillion. The question for investors is how reasonable the bold forecasts seem for Nvidia.
It's all about the software
Nvidia shares are up nearly 600% since January 2023, thanks to the voracious appetite Demand for Graphics Processing Units (GPUs). Customers can't get enough of these industry-leading processors, which they need to meet the massive computing power needs of artificial intelligence (AI) applications. Nvidia already has next-generation chips in production, and from now on it plans to introduce new versions every year.
Nvidia also plans to integrate software to give customers more comprehensive solutions for data center servers. Rowland believes the software will be a major factor pushing Nvidia's stock price to its high estimates.
Nvidia's CUDA (Compute Unified Device Architecture) toolkit allows users to develop, optimize, and deploy applications on multiple types of GPU-accelerated embedded systems. Roland said that CUDA is “the An operating system for processing large language models and/or training as of now.”
Aggressive investment mathematics
It makes sense to focus on software and other products outside of GPUs as potential drivers of Nvidia's future gains. After all, while demand outstrips supply for chips, production capacity remains a constraint on how much revenue Nvidia can generate from its hardware. Competition is also likely to reduce its market share.
But Rowland's assessment still seems a bit aggressive. He based this target on valuing the stock at 51.5 times its 2025 forecast for adjusted earnings per share. I have no doubt that Nvidia will continue to grow its top and bottom lines. However, while it's a stock worth owning over the long term, it may not get that valuation as soon as next year.
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Howard Smith He has positions at Nvidia. The Motley Fool has positions on and recommends Nvidia. The Motley Fool has Disclosure policy.
1 Wall Street analyst believes Nvidia stock will reach $160. Is it a buy for about $130? Originally published by The Motley Fool
