Wall Street just can’t keep up with Nvidia (NASDAQ:NVDA) stock. As soon as analysts raise their price target on the artificial intelligence (AI) chipmaker, it blows past through their threshold on its way to new highs. Always playing catch up, Wall Street then raises their targets again.
In March alone, 15 analysts raised their target price level on NVDA stock even though many had just increased them the month before. Of the 43 analysts rating the semiconductor company, 40 of them say Nvidia is a buy or better.
It’s not often you get such a consensus about a company rising so fast, but with NVDA shares up 17% this month, they may need to hike their price levels again soon.
Like drinking from a firehose
The average increase analysts made to their Nvidia price targets was 21.8%. They ranged from a low of just 11.8% to a high of 33.3%. While the consensus outlook is $891 per share, suggesting near-4% downside from the chipmaker’s current price, the high-end’s $1,200 per share target indicates there’s another 30% gain possible. That might happen sooner than they think.
The reason for Wall Street’s enthusiasm in backing Nvidia is, of course, the explosive potential in AI. The nascent technology seemingly knows of no upside limits to where it can go.
What we do know is hyperscalers like Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) are building out their own data centers to meet the burgeoning demand for cloud infrastructure. Increasingly they need the power and capabilities offered by AI accelerators to handle the load.
It is estimated global hyperscale capacity has exceeded 13,700 megawatts (MW) and the four companies above account for 78% of the total. All have an unquenchable thirst for the power Nvidia chips supply.
Innovation at the speed of AI
There is a new arms race in chip architecture just like in the early days of computers. But now artificial intelligence is the driving force behind it and we’re seeing oneupmanship occur almost daily.
Nvidia’s H100 chips were virtually the standard when AI burst on the scene. They led to the initial explosive growth trajectory of NVDA stock. It was only recently that Advanced Micro Devices (NASDAQ:AMD) unveiled its new MI300X chip that was more powerful the the H100 and came in at a cheaper price.
But Nvidia raised the stakes soon after with its GH200 Grace Hopper superchips that raised the bar once more, though they do carry a higher price tag. But the company just announced its new Blackwell GPU architecture-based AI system, which allocates 33% more bandwidth content to HBM3E high-bandwidth memory.
HBM3E delivers over 20 times the memory bandwidth standard D5-based DIMM server modules can and at 30% lower power consumption. That’s important for AI systems that consume massive amounts of power. According to industry analysts at Gartner, most AI GPUs will draw 1,000 watts of electricity by 2026, a 54% increase from the 650 watts used today. In fact, data centers will use AI itself to manage power consumption.
Nvidia has set itself up as the premier chipmaker for AI applications for today and tomorrow.
There is no ceiling in sight
It may be that this time next year Wall Street’s price targets will look quaint in comparison to where NVDA stock trades. And analysts will still be playing catch up by raising their outlooks every month.
While we know intuitively that Nvidia can’t keep growing in perpetuity at the rate it has been, for the moment their seems no reason it won’t be topping the high end of forecasts sooner rather than later.
A time will come when the AI mania fades and demand returns to more normal levels. Yet that doesn’t appear to be now or in the immediate future. Nvidia will keep breaking through to new highs.
On the date of publication, Rich Duprey did not hold (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.
