It’s a testament to Nvidia Corp.’s success over the past year that Wall Street is, in a sense, looking past eye-popping metrics like a fivefold increase in data center revenue in the latest quarter.
But, in fact, investors are so accustomed to this type of performance from Nvidia NVDA,
who are increasingly wondering how long the company can continue to grow. In this context, one particular comment from management struck Bernstein analyst Stacy Rasgon.
“[O]Over the long term, the company not only sees computing accelerating across its current $1 trillion installed data center infrastructure, but also sees the installed base doubling to $2 trillion over the next five years ,” Rasgon wrote in a note to clients.
This expansion of the installed base “sounds almost scary, but if true it would suggest absolutely gigantic growth potential yet to come,” he continued.
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From Rasgon’s perspective, Nvidia’s stock “still appears to have legs,” while the company’s opportunities in the data center sector “are enormous, and still in their infancy, with substantial upside still possible.”
He rates the stock an outperform and raised his price target to $1,000 from $700.
Nvidia shares rose 13% in premarket trading on Thursday. If these gains are held through the regular session, they would increase Nvidia’s market capitalization by $215 billion.
Adjectives were aplenty as analysts digested Nvidia’s report, with TD Cowen’s Matthew Ramsay decrying “a seemingly insatiable demand for Nvidia-based AI solutions” that suggests a run rate in excess of $80 billion for the gaming business. Nvidia data center.
“We continue to believe that the industry is at the beginning of two paradigm shifts towards accelerated computing and generative AI, with Nvidia firmly positioned as a leader in both,” Ramsay wrote.
He was encouraged by management’s comment that approximately 40% of data center revenue came from supporting inference applications. Inference in AI happens when models make predictions from data.
“The fact that nearly half of Nvidia’s data center revenue supports inference workloads is further evidence of this [large-language model] inference will be a major driver of demand for Nvidia and other accelerators in the future,” he wrote.
Ramsay has an outperform rating on Nvidia stock and raised his price target to $900 from $700 late Wednesday.
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Cantor Fitzgerald’s CJ Muse praised Nvidia’s “Goldilocks” message, as the company’s guidance was “on point” and offered “ample room for estimate upside throughout the year.”
Nvidia’s expectation that demand will outstrip supply this calendar year implies the potential for sequential revenue growth throughout the period. Meanwhile, he noted that executives “have suggested expected shortages for new product launches, including H200, Spectrum-X and B100, providing confidence that growth will continue well into the future. [calendar 2025].”
Muse raised its price target to $900 from $775 late Wednesday, with that new target “likely conservative” and reflecting a 32x multiple of its $28 estimate for adjusted earnings per share for the next calendar year.
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