Goldman analyst reveals new Nvidia price target tied to AI demand boost

Nvidia  (NVDA) – Get Free Report shares hit a record Monday, with the stock adding more than $450 billion in value so far this year, as investors continue to bet on the prospects of the AI-chip maker amid a surge in demand from the biggest tech companies

Nvidia, which has seen its market value more than triple over the past year, has cemented its place at the world’s biggest producer of chips for artificial-intelligence applications. 

Its lineup of powerful semiconductors is integral to the expansion plans of cloud-computing giants such as Microsoft  (MSFT) – Get Free Report and Alphabet as well as Magnificent 7 peers Meta Platforms and Amazon  (AMZN) – Get Free Report.

Related: Big tech stocks are doubling down on AI

In fact, Meta  (META) – Get Free Report Founder and CEO Mark Zuckerberg told investors earlier this month that the company would have around 350,000 H100 graphics-processing units, the AI-focused chips Nvidia makes, in place by the end of the year.

That would take Meta’s total of Nvidia GPUs to around 600,000, a level that would establish it as one of the largest AI systems in the world, as the company consolidates its AI-research team more closely to its business unit.

Nvidia, which is expected to post its fourth-quarter earnings after the close of trading on Feb. 21, is likely to see revenue rise to more than $20.2 billion, a more than three-fold increase from a year earlier, amid the surge in AI demand. 

Taiwan Semi outlook adds to NVDA optimism

Taiwan Semiconductor,  (TSM) – Get Free Report the world’s biggest contract chipmaker and a lead supplier for Apple  (AAPL) – Get Free Report iPhones, added to that optimism last month when it said 2024 sales would likely rise around 20% following a better-than-expected fourth-quarter earnings report.

Jensen Huang co-founded Nvidia in 1993, a year after receiving a master’s degree from Stanford. The company is now valued at $1.7 trillion.

SOPA Images/Getty Images

Taiwan Semi, which is also a major component of Nvidia’s supply chain, called itself a “key enabler for AI applications” and said it expected to spend between $28 billion and $32 billion on capital improvements over the coming year.

New trade restrictions on the sale of high-end technologies to China, put in place last year by the Biden administration, are likely to provide a headwind to Wall Street’s $21.4 billion first-quarter revenue forecast.

But upbeat outlooks from big customers like Meta, Alphabet’s  (GOOGL) – Get Free Report Google and Microsoft over the past two weeks suggest demand is unlikely to diminish as hyperscalers rollout their newly defined AI strategies. 

Nvidia adding to chip lineup

Nvidia is also set to add another powerful chip, the next generation B100 Blackwell, to its AI-focused lineup later this year, adding even more heft to its revenue prospects.

Goldman Sachs analyst Toshiya Hari added Nvidia stock to the investment bank’s conviction buy list on Monday. Hari sees the potential for a 3% to 5% beat on both fourth-quarter revenues and the current-quarter outlook from Nvidia, “mainly due to incremental supply gains offset by China restrictions and some transition effects prior to [the] B100 accelerator launch.”

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“We no longer assume a dropoff in data-center revenues [this year] and instead model consistent growth through [the first half of next year] driven by continued spending on [generative-AI] infrastructure by the large cloud-service providers, a broadening customer profile and multiple new-product cycles,” Goldman analysts wrote.

With that outlook in place, Hari lifted his price target on Nvidia by $175, to $800 per share, a level he said could be achieved over the next 12 months. 

“We believe Nvidia will remain the industry gold standard for the foreseeable future given its robust hardware and software offerings, and the pace at which it continues to innovate,” Hari wrote.

Nvidia shares rose 3% in early Monday trading, against a 0.68% decline for the Nasdaq, and were last seen changing hands around $682. 

The stock hit an all-time high of $694.97 earlier in the session. The shares have risen more than 42% since the start of the year.

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