One analyst’s new price target on Nvidia is Wall Street’s highest for the chipmaker, valuing it at nearly $4 trillion.
One of the big debates among Wall Street followers lately has been just how far Nvidia (NVDA 3.51%) stock can run. A new report from one analyst leads the charge on how high shares will go.
Susquehanna senior semiconductor analyst Chris Rolland just raised his firm’s price target from $145 to $160 per share. That would represent a gain of more than 20% from recent levels to a market cap of $3.94 trillion. The question for investors is how bold an outlook seems reasonable for Nvidia.
It’s all about the software
Nvidia shares have soared by nearly 600% since January 2023, thanks to insatiable demand for its graphics processing units (GPUs). Customers can’t get enough of those industry-leading processors, which they require to meet the massive computing power needs of artificial intelligence (AI) applications. Nvidia already has its next-generation chips in production, and henceforth plans to introduce new versions every year.
Nvidia also plans to integrate software to give customers more end-to-end solutions for data center servers. Rolland thinks that software will be a key factor that drives Nvidia’s share price to his Street-high estimate.
Nvidia’s CUDA (Compute Unified Device Architecture) toolkit allows users to develop, enhance, and deploy applications on multiple types of GPU-accelerated embedded systems. Rolland said that CUDA is “the operating system for large language model processing and/or training as of right now.”
Aggressive investing math
It makes sense to focus on software and other products beyond GPUs as potential drivers of Nvidia’s future gains. After all, while demand outpaces supply for chips, production capacity remains a limitation on how much revenue Nvidia can generate from its hardware. Competition is also likely to chip away at market share.
But Rolland’s valuation still appears a bit aggressive. He based that target on the stock being valued at a ratio of 51.5 times his 2025 forecast for adjusted earnings per share. I don’t doubt Nvidia will keep growing its top and bottom lines. However, while it’s a stock worth owning for the long term, it might not get that valuation as soon as next year.