Nvidia(NASDAQ: NVDA) already in the stock market in 2024, it has gained almost 180% at the time of this writing. This is due to the strong growth that the company has clocked in the new quarter on account of the strong demand for graphics cards that are distributed in artificial intelligence (AI) servers.
The stock’s 12-month average price target of $150 – as per the 64 analysts who cover Nvidia – suggests that there is no higher bid as it represents a gain of only 9% from current levels. But, Bank of America recently raised the price target on Nvidia from $165 to $190, which will translate into a 38% gain from the current level.
Let’s take a look at why this is happening and see if this high-flying semiconductor stock can rise above consensus estimates and deliver further gains.
Bank of America analysts raised their price target on Nvidia due to the company’s dominant position in the AI ​​chip market. He believes that chip makers can continue to command an estimated 80% to 85% share of this space, which puts the company in a good position to capture the $400 billion market opportunity.
Bank of America’s bullishness also stems from the arrival of Nvidia’s new generation of Blackwell processors, as well as good earnings reports from major suppliers. TSMC and Nvidia CEO Jensen Huang claims that the expectations for future Blackwell cards are “crazy.” It is worth noting that Nvidia management indicated in the August earnings conference call that the company is on track to sell several billion dollars of Blackwell processors in the fourth quarter of the current fiscal year.
More importantly, the demand for Blackwell chips is expected to be higher than the supply in 2025. This will not come as a surprise as many cloud computing giants are in line to deploy Nvidia’s Blackwell processors. In March of this year, Nvidia management indicated that Amazon Web Services, Dell Technologiesgoogle, Meta, MicrosoftOpenAI, Oracle, Teslaand xAI is one of the companies expected to use the Blackwell platform.
That’s not surprising considering the huge leap in performance expected from Nvidia’s Blackwell platform compared to previous-generation Hopper chips. More specifically, Nvidia promises a 4-fold increase in AI training performance and a 30-fold increase in AI inference compared to Hopper. Even better, Nvidia claims that Blackwell can train large language models (LLM) with “up to 25x the cost and lower energy consumption than before.”
In addition, Nvidia is set to extend its technological leadership in the AI ​​chip market with the arrival of Blackwell. That’s why it won’t be surprising if the company maintains a strong AI chip market share as predicted by Bank of America analysts. This should ideally pave the way for strong long-term growth for Nvidia.
Bank of America predicts that the size of the AI ​​accelerator market could jump to $280 billion by 2027 before climbing north of $400 billion in the long term. Nvidia has generated nearly $49 billion from its data center business this year. Of that, $42 billion comes from the sale of computing chips such as AI graphics cards, while the rest comes from the sale of network solutions.
At this rate, Nvidia can end fiscal 2025 (which will end in January 2025) with $84 billion in revenue from the sale of AI accelerators. If Nvidia controls even 75% of the AI ​​accelerator market in 2027 (which will coincide with fiscal 2028), it can generate $210 billion from this space (based on BofA’s estimated market size of $280 billion). This would be a big jump from the AI ​​accelerator revenue Nvidia set for the current fiscal year.
Throw in the potential revenue that Nvidia could generate from sales of its AI network chips over the next five years, and there’s a solid chance the company’s top line will exceed analyst expectations.
NVDA Revenue Estimates for the Current Fiscal Year Chart
NVDA Revenue Estimates for Current Fiscal Year data by YCharts.
At the same time, the $400 billion long-term revenue opportunity in AI chips suggests that there is more room for Nvidia to increase its AI revenue in the future. All of this explains why analysts expect Nvidia’s bottom line to increase at an impressive annual rate of 57% over the next five years. The market can reward solid earnings with higher stocks in both the short and long term.
So, this AI stock looks good to be close to Bank of America’s updated price target before going higher in the near future. That’s why investors looking to add AI stocks to their portfolios would be better off buying Nvidia because it’s trading at a nice 35 times forward earnings right now, which isn’t cheap. Nasdaq-100 the index has a forward earnings multiple of 30 (using the index as a proxy for technology stocks).
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former Facebook director of market development and spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Amazon, Bank of America, Meta Platforms, Microsoft, Nvidia, Oracle, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Nvidia Shares Could Soar Another 38%, According to 1 Wall Street Firm was originally published by The Motley Fool
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