TLDR
- Barclays raised Nvidia’s price target to $240 from $200, representing a potential 36% gain from current levels
- Over $2 trillion in AI infrastructure spending has been announced, with 65-70% expected to benefit Nvidia’s compute and networking business
- Nvidia formalized a major partnership with OpenAI, committing up to $100 billion and providing data center chips
- Barclays projects Nvidia’s adjusted earnings per share to jump from $3 in fiscal 2025 to $6.93 by fiscal 2027
- The new price target uses a 35x earnings multiple, up from the previous 29x multiple
Nvidia shares dipped 0.3% in premarket trading Thursday despite receiving a major vote of confidence from Wall Street. The stock has largely treaded water over the past month even as tech companies signal massive AI investments.
Barclays analyst Tom O’Malley boosted his price target on Nvidia to $240 from $200. The new target suggests a 36% rise from current levels around $176. He kept his Overweight rating on the chipmaker.
The analyst called Nvidia “the most attractive name in our space.” He expects the company to be the main winner from a massive wave of AI infrastructure spending.
O’Malley identified over $2 trillion in planned AI spending across roughly 40 gigawatts of power. This represents a rapid expansion in the scale of AI investment over the past year.
Within that spending, Barclays estimates 65-70% will go toward compute and networking. This is Nvidia’s strongest area. The bank expects this money to flow heavily into Nvidia’s financial results over the next five years.
The analyst noted that more deals are likely in the pipeline. This makes updated guidance of $3-4 trillion in total AI spending look more realistic.
Earnings Projections Jump Higher
Based on the updated model, Barclays now projects Nvidia’s adjusted earnings per share to surge from $3 in fiscal 2025 to $6.93 by fiscal 2027. This implies a 53% year-over-year jump.
The bank’s new $240 target is set at 35 times its 2026 earnings estimate. This is up from the previous 29 times multiple.
O’Malley noted the target would equal 30 times earnings if $35 billion in revenue from the recent OpenAI deal were included. The higher multiple reflects potential upside from continued AI momentum and data center builds.
Nvidia announced Monday it will commit up to $100 billion to OpenAI. The partnership provides the ChatGPT maker with data center chips. This formalizes a major partnership in the race to expand AI infrastructure.
The two companies signed a letter of intent covering at least 10 gigawatts of Nvidia systems. Final terms are expected in the coming weeks.
Market Position Remains Strong
O’Malley stressed that Nvidia remains central to the AI ecosystem. This is true despite the emergence of custom silicon and competing accelerators.
Barclays’ AI tracker points to 19 million GPUs tied to announced projects. Hyperscalers like Amazon, Microsoft, Google, Oracle and Meta are driving much of this demand.
The analyst highlighted usage growth in AI applications. ChatGPT message volumes jumped 482% in June alone.
Barclays set an upside case of $300 per share. This assumes a larger AI market, stronger networking demand and higher margins.
The downside case is $140 per share. This reflects risks like weaker AI spending, a slower auto ramp and pricing pressure.
Other chip stocks moved lower in premarket trading. Advanced Micro Devices fell 0.7% while Broadcom dropped 0.2%.
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