The Case for Nvidia to Reach $800 or Much More

Analysts at Bank of America (BofA) have raised their target for Nvidia to $800 and see the company achieving earnings per share of $40 by 2027 or possibly much more.

Nvidia NVDA may report higher-than-expected fourth-quarter revenue due to supply gains as the company prepares to launch its B100 graphics processor in the second half of this year, BofA Securities said in a note.

The brokerage expects “a notable but more measured” revenue beat of 3pc to 5pc, which would translate to $500m to $1bn upside to both the fourth-quarter topline and the first-quarter outlook. The Capital IQ-polled consensus is for fourth-quarter sales of $20.21bn, largely in line with the guidance provided in November for $20bn, plus or minus 2pc.

The results are due out on Feb 21.

Incremental supply gains were likely offset by restrictions in China while the fourth quarter may have benefited from “some transition effects” before the B100 accelerator launch, BofA analysts, including Vivek Arya and Blake Friedman, said in a note emailed Friday.

“While a (3pc-5pc) beat would pale vs. the 10pc/22pc beat/raise of prior quarters and perhaps disappoint some bulls, the more measured pace will also be seen as creating more fertile ground for continued growth in (the calendar year 2025) and beyond,” the analysts said.

BofA reiterated its buy rating on Nvidia while raising its price objective to $800 from $700, saying the valuation is “compelling.” The stock closed 5pc higher on Friday.

The brokerage forecasts growth in the data centre artificial intelligence accelerator market from $43bn in 2023 to more than $160bn by 2027. At that level, the analysts see a path for Nvidia to achieve more than $40 in pro-forma earnings per share in 2027 and “much higher” if the market hits AMD’s AMD $400bn level.

“Early days, but results from top US cloud customers suggest solid motivation for spending in (generative AI),” BofA said.

MT Newswires 2 February

In their latest quarterly report on 31 January 2024, CEO Lisa Su, was strikingly bullish on prospects for the AI accelerator market.

Taking a step back, we believe AI is a once-in-a-generation transition that will reshape virtually every portion of the computing market, starting in the Data Centre and then expanding into PCs and across multiple embedded markets. We have built excellent customer traction based on the strength of our multiyear AI hardware and software road maps, and we see clear opportunities to drive our next wave of growth as we deliver leadership AI solutions across our portfolio. In the Data Centre we see 2024 as a start of a multiyear AI adoption cycle with the market for Data Centre AI accelerators growing to approximately $400bn in 2027.

Lisa Su, CEO, Advanced Micro Devices, Q4 2024, 31 January 2024

She also delivered a strikingly positive view of AMD’s prospects.

This is an incredibly exciting time for the industry and an even more exciting time for AMD as our leadership IP, broad product portfolio and deep customer relationships position us well to deliver significant revenue growth and earnings expansion over the next several years.

Lisa Su, CEO, Advanced Micro Devices, Q4 2024, 31 January 2024

If you want to have some fun and let the imagination soar look at what is being said in the chat rooms.

Imho [in my humble opinion] 2024 will be an amazing banner year for NVDA. Keep in mind that the Chatgpt/Ai revolution pretty much started in early 2023 (Chatgpt was introduced to the public in Nov. 2022).

Last year’s corporate budgets were already in place when Ai caught on fire. Thus, Ai hardware/software was NOT really budgeted for. However, now that the public and the corporate world has marinated on this explosion for the past 12 months, you can bet CEO’s from around the world and government(s) have Ai budgets for spending for 2024 front and centre! After all, no major corporation wants to be left behind and all “C-level” Execs feel the urgency as they seek more tools to make their companies more efficient and make more money.

The bottom line, for 2024 we can expect YUUUUGE spending because this is the first year $$$ is allocated for major Ai hardware/software spending. Subsequent years 2025, 2026+ will experience an even faster acceleration and adoption as the laggards (slow to adopt companies) play catch up.

Even though NVDA has been around since a long time, went through several stock splits, and is currently close to $500 (v $660 plus currently), imho this is only the beginning of the “second chapter” for this company. It is still early days

Yahoo Finance 6 February 2024

Both Nvidia and Advanced Micro Devices have strong charts (not shown) consistent with higher prices ahead as does the chart for the Philadelphia Semiconductor index.

Equally impressive is the backdrop provided by the Nasdaq 100 chart.

What investors are not yet discounting is the possibility of explosive AI-related growth extending for several years into the future or even perhaps indefinitely in a technology-driven world.

First of all, we’re really pleased with the progress that we’ve made in our Data Centre GPU [graphics processing unit] business.

I think the ramp that we’ve seen, the customer traction that we’ve seen even in the last few months, I think has been great. And that gives us a lot of confidence in the ramp of this business. I think the beauty of the AI market here is, it’s growing so quickly that I think we have both the market dynamic, as well as our ability to gain share in that framework. The point I will make is our customer engagements right now are all quite strategic, dozens of customers with multi-generational conversations.

So, as excited as we are about the ramp of MI300 and, frankly, there’s a lot to do in 2024. We are also very excited about the opportunities to extend that into the next couple of years out into that ’25, ’26, ’27 timeframe. So, I think, we see a lot of growth. I think it’s a little early to make market share projections, but I would say it’s a significant growth driver given the market demand, as well as our own product capabilities.

Lisa Su, CEO, Advanced Micro Devices, Q4 2024, 31 January 2024

This is exactly what the Yahoo Chat Room guys are talking about.

This ties in with the notion that we are at the dawn of the age of AI, which many seasoned market observers believe is exactly what is happening.

Strategy – Buy Nvidia, AMD and SOXX

Semiconductor technology is at the heart of the accelerating technology revolution which is transforming life on planet Earth. It is a no-brainer to have exposure to the sector and its star performers.

Share Recommendations

Nvidia. NVDA. Buy @ $660

Advanced Micro Devices AMD. Buy @ $177.50

SOXX. Buy @ $596