TLDR:
- Nvidia stock is up 190% YTD with BofA analyst predicting 40% more upside
- New Blackwell chips are already sold out for next 12 months with 25x performance improvement
- Company expected to generate $200B in free cash flow over next two years
- Stock trading at 37x forward P/E, considered undervalued by some analysts
- Long-term sustainability concerns exist around AI infrastructure spending
The semiconductor giant Nvidia continues its remarkable market performance in 2024, with its stock price up 190% year-to-date and trading near record levels. The company’s shares have seen an 18% increase in October alone, reflecting strong investor confidence in its artificial intelligence chip business.
Bank of America analyst Vivek Arya has recently raised earnings estimates for both 2024 and 2025, citing robust demand for Nvidia’s chips.
The company’s latest Blackwell chip has already sold out its entire production run for the next 12 months, demonstrating unprecedented market interest.
Nvidia’s transformation from a gaming chipmaker to an AI powerhouse has fundamentally changed its business model. The company now functions as a complete system integrator, providing full computing racks that include networking, optical resources, and memory components.
The financial metrics supporting Nvidia’s growth are substantial. The company is projected to generate $200 billion in free cash flow over the next two years. Despite the dramatic stock price appreciation, it trades at a forward price-to-earnings multiple of 37 times, which some analysts consider attractive given the growth trajectory.
Current market conditions show Nvidia significantly outperforming its competitors. While Nvidia’s stock has nearly tripled this year, AMD has managed only a 5% gain, and Intel has experienced a 55% decline amid ongoing operational challenges.
Meta Platforms, one of Nvidia’s major customers, plans to spend between $35 billion and $40 billion on capital expenditures this year, with a significant portion allocated to data center infrastructure supplied by Nvidia.
The company’s latest technological advancement, the Blackwell-based AI chip infrastructure, promises to reduce inference costs for large language models by up to 25 times compared to previous generations. This significant improvement has contributed to the strong demand.
Cloud service providers are aggressively purchasing Nvidia’s AI chips to maintain competitive advantages. Alphabet’s CEO Sundar Pichai has emphasized that the risk of underinvesting in AI infrastructure far outweighs the risk of overinvestment.
Looking ahead, Nvidia is preparing to release next-generation AI chips – Blackwell Ultra, Rubin, and Rubin Ultra – with expected market availability beginning in Q3 2025.
The company’s revenue streams have diversified beyond traditional gaming markets. Nvidia’s role in AI infrastructure has positioned it as a critical supplier for data centers and cloud computing operations.
Major technology companies continue to increase their AI infrastructure investments, with cloud providers acting as intermediaries between Nvidia’s hardware and end-users.
The current market dynamics show sustained demand for Nvidia’s products across various sectors, from cloud service providers to social media companies investing in AI capabilities.
Some analysts, including Bank of America’s Arya, see potential for 40% additional upside in Nvidia’s stock price, citing the company’s strong market position and growing demand for AI infrastructure.
However, questions remain about the long-term sustainability of current AI infrastructure spending levels, particularly as companies face pressure to demonstrate returns on their substantial investments.
The most recent quarterly results showed revenue jumping 122% year over year to $30 billion, with profits increasing 168% to $16.6 billion, demonstrating the company’s current strong financial performance.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support