Volatile share movements in recent weeks suggest some investors are beginning to get nervous over Nvidia’s valuation. It’s too early to take profit on the stock as a flood of companies needing Nvidia’s chips for artificial-intelligence technology should support its growth, according to analysts at UBS.
Nvidia
stock (ticker: NVDA) has given back some gains in the run up to its quarterly earnings report next week. But UBS analysts are backing it to meet or even exceed higher expectations.
“NVDA is quite literally serving as ‘kingmaker’ as a huge wave of capital and new financing vehicles are chasing new AI software,” UBS analyst Timothy Arcuri wrote. “Enterprises are still very early in a struggle to access enough capacity to build out AI at scale—this likely lasts well into next year.”
Arcuri raised his target price on Nvidia stock to $540 from $475, and kept a Buy rating. The new target is based on a price-to-earnings multiple of 30 times UBS’s forecast for Nvidia’s 2025 earnings per share.
Nvidia stock is up 1.8% at $445.31 in premarket trading on Tuesday. The stock has roughly tripled in value this year, but is below its peak of more than $470 reached in July.
Nvidia is on track to go from having around 6% of the total $250 billion data-center market in 2022 to a market share of around 25% next year, according to Arcuri. He expects the successor to Nvidia’s current Hopper chips—tentatively named ‘Blackwell’—to begin ramping up in the fourth quarter of next year with a 40% higher average selling price than the current top-end H100 chip.
“Even for more tactical investors, it still seems early to get off this train because year-on-year comps [comparisons] won’t get tough until year-end,” Arcuri wrote.
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