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Nvidia (NASDAQ:NVDA) has been the hottest stock in the market for some time now. It’s the poster child of AI, with impressive returns to match. Yet with the share price up 52% over the last year and a market cap of several trillions of dollars, some think it could be hard to maintain the pace of growth. Here’s what some of the experts think.
Checking out the numbers
When I refer to the experts I’m talking about analysts from large banks and brokers. The research teams do the work and spend very many hours trying to figure out whether a company is reasonably valued and what its prospects could be. Then they put out a share price target for the coming year.
It’s no surprise that on my database, I can see 62 different companies with a share price forecast out for Nvidia right now. The highest level is $270, with the lowest at $100. For reference, the current share price is $176.
In terms of the more notable firms, Deutsche Bank is the lowest at $180, with Cantor Fitzgerald the highest at $240. Other major banks and brokers are somewhere between these two. If I strip out the outliers, it’s clear that the bulk of the contributors expect the stock to move higher in the coming year. In fact, the majority of forecasts sit just above the $200 mark, which represents almost a 15% gain from current levels.
Of course, I do need to take these figures with a pinch of salt. Nobody can perfectly predict where the stock is going to trade in a year’s time. So any investor needs to look at these figures, and use them to supplement their own research and opinion.
The future direction
Let’s run over both sides of the story for the coming year. On the positive side, AI demand remains very strong, refuting the claims that we’re in a bubble or that things are slowing down. As more companies, governments, and sectors adopt AI, demand for its data-centre products and software stacks is likely to keep growing.
Further, the business keeps pushing forward with new chip architectures. It recently struck a $5bn partnership with Intel to co‐develop data centre infrastructure. This effectively combines its GPUs with Intel CPUs, with the collaboration helping expand its reach going forward. This is just one case as to why the stock could keep rallying as it further integrates with similar companies.
However, there are risks. The biggest one that comes to mind is that of geopolitical and regulatory hurdles. Export controls (especially US restrictions limiting the sale of advanced chips to China), trade tensions, and potential further regulation are big risks. China has already placed bans on certain Nvidia chips. That reduces part of its addressable market and complicates supply chains.
We also need to factor in increased competition. The AI space is hypercompetitive, with everyone trying to get a piece of the action. Yet despite these concerns, Nvidia is still leading the way. So on balance, although I don’t see it repeating a 50%+ gain over the next year, I feel the stock can still increase in value from here. Therefore, I think it’s worth investors considering the stock if they don’t have a lot of existing AI exposure.
