Its business is huge, its profits are booming, and everyone already knows that Nvidia is the hottest stock on Wall Street. Is it possible that the world’s most valuable chipmaker still has a way to go?
Its rapid growth in this sector has seen Nvidia go from being a specialized manufacturer of gaming graphics processing units to becoming the third most valuable company in the world. It is currently worth almost $2.9 trillion, of which it has added more than $2 trillion since a historic earnings report sent its stock into the stratosphere last year..
That’s what many investors are betting on in what has become one of the stock market’s most astonishing wealth creation stories. For more than a year, Nvidia has exceeded earnings and stock price expectations. On Sunday, the company announced plans for new chips to stay ahead of the competition. On Monday, Bank of America analysts raised their price target once again to a high of $1,500, saying Nvidia’s premium is justified by its growth prospects. On Tuesday, its shares hit a new record high of $1,164.37.
“It’s like trying to catch up to a marathon runner who is sprinting,” said Adam Gold, founder and chief investment officer of Katam Hill LLC. “They have been in the race for a long time. At the moment they have a great advantage and they are prepared to extend it this year and next.” Gold has owned Nvidia shares since 2016. It is now his largest position, and growing.
Gold is part of the Wall Street consensus that Nvidia’s leadership is unassailable, at least for now. Rivals have not been able to catch up to Nvidia with chips that power artificial intelligence workloads, known as accelerators.
The day after Nvidia unveiled its latest chip plans, Advanced Micro Devices said it is accelerating the introduction of its own. On Tuesday, Intel’s CEO also talked about new products. But none of Nvidia’s competitors come close to its dominance in AI.
Its recent earnings report shows that customers are still buying its current H100 chips, despite the arrival of a more advanced chip called Blackwell later this year. Capital spending forecasts from major tech companies revealed that they plan to spend even more than anticipated on AI computing infrastructure.
“The only thing stopping them from selling more is supply,” says Michael Kirkbride, partner and portfolio manager at Evercore Wealth Management. The visibility of Nvidia’s largest customers and growing demand from other industries make its valuation “really reasonable,” he said. “We are still buyers.”
