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1 Wall Street Analyst Thinks Nvidia Shares Will Hit $160. Is it a purchase around $130?




1 Wall Street Analyst Thinks Nvidia Shares Will Hit $160.  Is it a purchase around $130?

One of the big debates among Wall Street followers lately is about how far this will go Nvidia (NASDAQ: NVDA) stock can run. A new report from an analyst leads to the question of how high stocks will go.

Susquehanna senior semiconductor analyst Chris Rolland just now raised his company’s price target from $145 to $160 per share. That would represent a gain of more than 20% from recent levels, to a market cap of $3.94 trillion. The question for investors is how bold prospects seem reasonable for Nvidia.

It’s all about the software

Nvidia shares are up nearly 600% since January 2023, thanks to insatiable demand for graphics processing units (GPUs). Customers can’t get enough of the industry-leading processors they need to meet the massive computing power needs of artificial intelligence (AI) applications. Nvidia already has its next-generation chips in production and plans to introduce new versions every year from now on.

Nvidia also plans to integrate software to provide customers with more end-to-end solutions for data center servers. Rolland thinks software will be a key factor driving Nvidia’s stock price to his Street-high estimate.

Nvidia’s CUDA (Compute Unified Device Architecture) toolkit allows users to develop, enhance, and deploy applications on multiple types of GPU-accelerated embedded systems. Rolland said that CUDA “the operating system for processing and/or training large language models from now on.”

Aggressive investment math

It makes sense to focus on software and other products beyond GPUs as potential drivers of Nvidia’s future profits. After all, while demand exceeds supply of chips, production capacity remains a limit on the amount of revenue Nvidia can generate from its hardware. Competition is also likely to take away market share.

But Rolland’s valuation still seems a bit aggressive. He based that target on valuing the stock at a ratio of 51.5 times its 2025 forecast for adjusted earnings per share. I have no doubt that Nvidia will continue to grow its top and bottom lines. While it’s a stock worth owning in the long term, it may not reach that valuation until next year.

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Howard Smith holds positions at Nvidia. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has one disclosure policy.

1 Wall Street Analyst Thinks Nvidia Shares Will Hit $160. Is it a purchase around $130? was originally published by The Motley Fool