It is truly remarkable how Nvidia Corp. has been able to maintain its impressive momentum over the past year, with Wall Street now looking beyond the staggering increase in data-center revenue in the latest quarter.
Unwavering Investor Confidence
Investors have come to expect exceptional performance from Nvidia (NVDA) and are now speculating about the company’s future growth trajectory. A notable comment from management caught the attention of Bernstein analyst Stacy Rasgon, who highlighted Nvidia’s long-term outlook.
In a note to clients, Rasgon mentioned, “Over the longer term, the company not only sees accelerated compute ramping through the current $1 trillion of installed data-center infrastructure but also sees that installed base doubling to $2 trillion over the next five years.”
Enormous Growth Potential Ahead
The prospect of this expansion in the installed base is both exciting and daunting. If realized, it could signify a massive growth opportunity for Nvidia in the coming years. Rasgon believes that Nvidia’s stock still has room to grow, particularly given the significant opportunity presented by the data-center business.
Rasgon has reiterated his outperform rating on the stock and raised his price target to $1,000 from $700, reflecting his confidence in Nvidia’s future performance.
Market Reaction and Analysts’ Insights
In premarket trading on Thursday, Nvidia shares surged by 13%, signaling a potential increase of $215 billion in the company’s market capitalization. Analysts have been effusive in their praise, with TD Cowen’s Matthew Ramsay noting the “seemingly insatiable demand for Nvidia-based AI solutions” that could drive Nvidia’s data-center business to a run rate exceeding $80 billion.
Overall, the consensus among analysts is that Nvidia’s growth potential remains robust, fueled by its leadership in AI solutions and the promising outlook for the data-center segment.
Nvidia Leading the Way in Accelerated Computing and AI
Nvidia is at the forefront of two major industry shifts towards accelerated computing and generative AI, with a strong position as the leader in both areas. Management’s commentary indicating that 40% of data-center revenue supports inference applications is a significant milestone. Inference, a key component of artificial intelligence, involves making predictions based on data.
Supporting Large-Language Model Inference Workloads
The fact that nearly half of Nvidia’s data-center revenues are dedicated to supporting inference workloads further emphasizes the growing demand for large-language model inference. This trend is expected to be a major driver for Nvidia and other accelerator manufacturers in the future.
Cantor Fitzgerald’s Positive Outlook on Nvidia
C.J. Muse from Cantor Fitzgerald praised Nvidia’s ‘Goldilocks’ messaging, highlighting the company’s balanced guidance that offers room for upside to estimates throughout the year. The expectation that demand will surpass supply this year bodes well for continued top-line growth. Furthermore, anticipated shortages for new products like H200, Spectrum-X, and B100 indicate a promising outlook for growth extending into 2025.
Conservatively Bullish Price Targets
Both Ramsay and Muse raised their price targets for Nvidia, reflecting their optimism about the company’s future performance. Ramsay’s target of $900 and Muse’s target, also at $900, are supported by strong growth projections and an optimistic outlook based on the current market dynamics.
Nvidia’s strategic positioning in accelerated computing and AI, coupled with consistent growth and demand exceeding supply expectations, set the stage for continued success in the fast-evolving tech landscape.