How Much Upside Is Left in NVIDIA (NVDA)?

Semiconductor powerhouse NVIDIA Corporation (NVDA) delivered extraordinary quarterly figures last month, surpassing its revenue guidance and analysts’ projections. The firm’s revenues tripled to $18.12 billion, and net income soared 13.6 times to $9.24 billion. Its non-GAAP EPS of $4.02 comfortably exceeded estimates, registering a 6.9x year-over-year surge.

Due to an early commitment to AI, NVDA has positioned itself as an undisputed market leader in the AI semiconductor industry. It has effectively positioned the company years ahead of its competitors, offering an all-encompassing platform that represents a holistic solution for all AI demands, from chips and processors to intricate software systems.

In its latest earnings cycle, NVDA’s persistent dominance in the AI chips marketplace was notable, demonstrated by Data Center revenues increasing 278.7% year-on-year to $14.51 billion. The company maintained robust non-GAAP gross margins at 75%, resulting in a 380 basis points rise quarter-over-quarter.

Amid mounting competition from rivals boosting their AI capabilities, NVDA owns a remarkable 80% share of the AI chip market. The company’s foresight to invest heavily in AI innovation years ahead of others now positions the company to capitalize on the industry’s exponential growth.

Furthermore, NVIDIA continues to spark innovations in the competitive AI scene, as evidenced by the development of GH200, the next iteration of Grace Hopper Superchip. Notably, the Santa Clara-based chipmaker also reported significant growth in the networking business, bolstered by advancements in InfiniBand technology.

Given the exceptional third-quarter performance, there is little surprise over Wall Street’s widespread upward revision in the revenue and EPS estimates. Analysts expect NVDA’s EPS for the fiscal year ending January 2025 to reach as high as $19.72 from the $12.30 expected in fiscal 2024 (ending January 2024).

For the fiscal year ending January 2024, NVDA’s revenue is expected to reach $58.86 billion, up 118.2% year-over-year, while for the fiscal year 2025, analysts expect its revenue to reach $89.70 billion. For the fourth quarter, the company expects its revenue to be $20 billion, plus or minus 2%.

NVDA responded to all the widespread speculation regarding its potential to deliver impressive results, prompting analysts to revise their already lofty price targets upward. Goldman Sachs’ analyst Toshiya Hari increased the price target to $625 due to robust demand and an improving chip supply chain.

JPMorgan’s analyst Harlan Sur hiked the target to $650, citing the “massive demand pull” for NVDA’s data center products, while Morgan Stanley’s Joseph Moore forecasts a price target of $603 due to anticipated reduced supply chain lead times next year.

Bank of America and Bernstein analysts upgraded their price expectation to $700 because of the expected rise in AI adoption, which they believe will counterbalance regulatory challenges associated with China. Wall Street analysts expect the stock to reach $661 in the next 12 months, indicating a potential…

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