There was fear that Nvidia‘s (NASDAQ:NVDA) stock rally may had run its course when the stock dipped around 5% in one trading day a few weeks ago. However, they were completely wrong. Nvidia’s shares seem to defy gravity, nearing $1000/share. The stock has nearly doubled in 2024. Last year, the company’s share returned a staggering gain of 240% last year, and 2024 may see ever better performance.
Below are three reasons why NVDA’s share price will reach $1,000 and possibly go beyond it.
Nvidia continues to dominate the AI space
Nvidia stock dominates in both gaming GPUs and AI chips. In fact, the chipmaker dominates about 81% of the market for AI chips used in personal computers and data centers. The chipmaker has effectively tackled and consolidated this new market in an unprecedented manner, and the only chipmaker likely to begin to rival it in the near future will be Advanced Micro Devices (NASDAQ:AMD), which plans to sell billions worth of AI chips in 2024. While AMD’s entrance to the market is welcomed, the chipmaker will have to be ready to face steep competition.
Earlier last week, NVDA stock released a new flagship processor, Blackwell, with 208 billion transistors. The new line of AI chips will be available later this year and will be used by some of the world’s largest data center operators.
Despite their being AI hype all around, Nvidia continues to live up to it.
Valuation is high but not stretched
Nvidia’s share price has been trading at a record high. However, the chipmaker’s forward P/E ratio is still well below where it was 12 months ago. Last March, the stock was trading at over 58.3x forward earnings.
The recent rally has caused shares to appreciate more than 90% year-to-date, yet the chipmaker’s stock only trades for just 38.1x forward earnings. This puts Nvidia’s earnings multiple below that of its key competitor, AMD, which trades at 49.3x forward earnings but above that of Intel’s (NASDAQ:INTC), which is trading around 31.4x forward earnings.
Despite a jaw-breaking rally, Nvidia’s stock and valuation seem to have a lot of runway left.
Wall Street has increased their price targets for NVDA
Wall Street analysts continue to be excited about Nvidia’s prospects. The company has an overwhelming “Strong Buy” rating from analysts. Out of the 55 analysts covering Nvidia, 50 rate the stock as a “Buy” or “Strong Buy,” while 5 analysts have maintained a “Hold” rating.
Recently, a number of investment banks have increased their price targets. TD Cowen increased theirs from $900 to $1,100, and the Swiss behemoth UBS has increased its price to $1,100 from $800.
Nvidia’s success in the AI market of course have created a lot of optimism. And it’s not just Western markets either. Despite a lack of access to China’s huge market, NVDA stock has made significant strides to sell AI chips to India-based companies and other companies based out of East Asia. These are just some of the reasons for Wall Street analysts to remain bullish on NVDA, despite the company encroaching upon its 12-month average price target.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
