Nvidia shares are up 11-fold in four years, but Wall Street analysts are still bullish.
Nvidia (NVDA 2.57%) Shares have risen 1,080% over the past four years, meaning a $10,000 investment in the semiconductor company in May 2020 would now be worth $118,000. To put these numbers into context, S&P 500 (^GSPC 0.70%) 91% returned during the same period, so that $10,000 invested four years ago would now be worth $19,100.
Nvidia brought down its share price with a 4-for-1 stock split in July 2021, and the company now has a 10-for-1 stock split planned for next month. After the market closes on Friday, June 7th, shareholders will receive nine new shares of Nvidia stock for every share held at the previous close. Obviously, the split won't have a direct impact on the company's value, but it will make the shares more affordable.
Despite Nvidia's extraordinary run, 90% of Wall Street analysts who follow the company still rate the stock a buy, and the remaining 10% rate the stock a hold. Not a single analyst recommends selling. Nvidia has an average price target of $1,200 per share, which implies a roughly 13% upside from its current price of $1,064 per share.
Here's what investors should know about this artificial intelligence stock.
Nvidia is a leader in high-speed data center computing.
Nvidia is best known for its graphics processing units (GPUs), chips that are the gold standard for (1) rendering highly realistic computer graphics in multimedia such as video games and (2) artificial intelligence (AI) applications such as complex data centers. Accelerate workloads. . The company has an exceptionally strong presence in both markets, although its biggest growth opportunities lie in the latter category.
For context, Wells Fargo Data compiled by Eric Flanningham shows that Nvidia accounted for 98% of data center GPU spending in 2023, and the company is expected to capture 94% of the market share in 2024. Perhaps more importantly, Nvidia accounts for 92% of data center GPU usage for creative AI workloads in 2023, according to IoT Analytics.
This dominance is partly due to its full-stack strategy. GPUs are only one element of the data center stack, but other components are needed to build and run complex applications. This includes central processing units (CPUs), networking platforms, and software development tools. Nvidia addresses each layer of the stack. This makes the company a one-stop shop for AI training and inference, and it supports the rapid innovation that has kept Nvidia ahead of its peers.
CEO Jensen Huang commented on this benefit during the latest earnings call. “We are moving very fast and forward. [our systems] Hurry because we have all the stacks here. We literally build the entire data center and we can monitor everything, measure everything, optimize everything,” he told analysts. “At the entire data center scale it's Deeper knowledge is fundamentally what sets us apart today.”
Nvidia just delivered another blockbuster financial report.
Nvidia reported financial results for the first quarter of fiscal 2025 (ending April 28, 2024) that easily beat Wall Street expectations. Revenue rose 262% to $26 billion on exceptional sales growth in the data center product category, driven by demand for self-generative AI systems. Meanwhile, non-GAAP net income rose 461 percent to $6.12 per share.
The chart below provides more detail on Nvidia's first-quarter revenue growth across its four primary product categories.
Nvidia's revenue growth by product category in the first quarter of fiscal 2025 (ending April 28, 2024). OEM and others were excluded as it represented only 0.3% of total revenue.
Looking ahead, Nvidia guided for $28 billion in second-quarter revenue, implying 75% growth. That easily beat the $26.6 billion expected by Wall Street analysts. Management also guided for non-GAAP net income of about $15.5 billion, an increase of about 130 percent.
More importantly, CFO Colette Kress recently told analysts that “demand may exceed supply in the next year” due to the upcoming launch of Blackwell, the name for Nvidia's next-generation AI factory plate. The form is given. The Blackwell GPU architecture provides four times faster AI training and 30 times faster AI inference than the previous Hopper GPU architecture.
Nvidia stock trades at a somewhat reasonable price.
According to Grandview Research, the graphics processor market is forecast to grow 28 percent annually through 2030, and AI spending on hardware, software and services is expected to grow 37 percent annually over the same period. Based on these estimates, Nvidia has a good shot at annual earnings growth in the low 30% range (plus or minus a few points) by the end of the decade.
In fact, Wall Street expects the company to grow earnings per share by 38% annually over the next three to five years. A current price of 62.3 times earnings from this consensus estimate seems relatively reasonable, especially compared to other AI stocks. I say this because those values (the price-to-earnings ratio divided by forecasted revenue growth) give Nvidia a PEG ratio of 1.6. Meanwhile, the chipmaker Advanced Micro Devices It has a PEG ratio of 5.8, and cloud services providers the alphabet And Microsoft The ratio of PEG is 1.5 and 2.7 respectively.
That doesn't mean Nvidia shares are cheap, but the stock is (allegedly) cheaper than AMD and Microsoft, and as cheap as Alphabet. I think investors can buy some Nvidia shares now, provided they keep their purchases small (perhaps 2% of their portfolio). Investors should also understand the risks associated with Wall Street's lofty expectations. Nvidia stock could explode if the company doesn't match revenue growth estimates set by analysts.
Suzanne Frey, an Alphabet executive, is a member of The Motley Fool's board of directors. Wells Fargo Motley Fool Company is the advertising partner of The Ascent. Trevor Genuine has positions in Nvidia. The Motley Fool has positions and recommends Advanced Micro Devices, Alphabet, Microsoft and Nvidia. 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.