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Is it prudent to invest in Nvidia stock at this juncture? It could potentially be a once-in-a-lifetime opportunity. Nvidia has emerged as one of the most closely watched and talked-about equities in recent times, playing a crucial role in shaping the fortunes of the broader market due to its leadership in AI chips.
The stock has been a significant driver of the S&P 500’s gains, accounting for over one-third of the index’s upward movement at certain points this year. The hype surrounding Nvidia has reached such heights that some investors have gone so far as to organize watch parties in anticipation of the company’s earnings releases.
However, the meteoric rise of Nvidia into a $3 trillion company has not been without its fair share of controversy. While some on Wall Street have questioned whether the stock has further room for growth, others believe that the ongoing AI boom will continue to propel Nvidia’s ascent.
As investors weigh their options regarding whether to buy into Nvidia or sell off their positions, analysts at Bank of America have expressed their bullish stance on the stock. In a recent note, they reaffirmed their buy rating on Nvidia and upped their price target to $190 from $165, suggesting a potential upside of 38% from the stock’s closing price on Friday.
With this new price target, Nvidia’s market capitalization would see a significant surge to $4.7 trillion from $3.4 trillion, should the stock reach $190 per share. BofA analysts have even gone so far as to dub Nvidia a “generational opportunity,” citing the company’s massive total addressable market of over $400 billion in AI accelerators.
Their analysis indicates that the demand for AI models is constantly evolving, with developers like OpenAI, Google, and Meta launching new LLM models with increasing frequency. Each significant generation of AI models also requires a substantial increase in compute power for training, driving further demand for Nvidia’s products.
Furthermore, recent feedback from executives at other chip companies like Taiwan Semiconductor and ASML, as well as remarks from AMD, have underlined the strong demand for AI technology. BofA’s discussions with industry leaders at Broadcom and Micron have provided similar indications, reinforcing their optimism in Nvidia’s prospects.
In a recent interview with CNBC, Nvidia’s CEO Jensen Huang highlighted the unprecedented demand for the company’s latest AI processor, Blackwell, which is currently in full production. Huang expressed confidence in Nvidia’s position as a frontrunner in the AI space, emphasizing the company’s appeal as a leader in cutting-edge technology.
BofA’s positive outlook on Nvidia is further bolstered by the company’s software offerings, which complement its hardware dominance, as well as its strategic partnerships with major enterprises like Accenture, ServiceNow, and Microsoft. These collaborations have helped Nvidia build a robust ecosystem for AI, strengthening its market position.
The analysts at BofA project that Nvidia has the potential to generate over $200 billion in free cash flow over the next two years, putting it in league with tech giants like Apple in terms of financial performance. Earnings reports from Microsoft, Google, and Amazon, as well as Nvidia’s own upcoming report on November 20, are expected to shed more light on the demand for AI technologies.
While some skeptics on Wall Street have raised concerns about the profitability of heavy investments in AI technologies, the tech sector is witnessing intense competition to stay ahead in the AI race. BofA notes that the pace of new model development in AI is accelerating, particularly in the realm of LLMs, which are being enhanced to improve reasoning capabilities and increase size, demanding greater training intensity.
Overall, the outlook for Nvidia appears bright, with strong potential for growth driven by sustained demand for AI technology. As the company continues to innovate and expand its market reach, investors may find Nvidia stock to be a compelling investment opportunity in the current landscape of the tech industry.
