Nvidia (NASDAQ: NVDA) has undeniably emerged as the epitome of the potential unlocked by recent advancements in artificial intelligence (AI). With its state-of-the-art processors leading the pack in AI applications, Nvidia has solidified its position as the industry leader. This dominance in the AI space has propelled Nvidia’s stock to unprecedented heights, witnessing a staggering surge of over 500% since the beginning of 2023.
One Wall Street analyst believes there’s still much more stock price appreciation to come.
Nvidia is profiting from the AI gold rush
Analysts at Truist Financial have revised their price target on Nvidia, setting it at $1,177 while reiterating their buy rating on the shares. This projection indicates a potential upside of 33% over the next 12 months compared to the closing stock price on Monday. The Truist analyst emphasized that investors may be undervaluing Nvidia’s dominant position in parallel computing and artificial intelligence (AI).
Furthermore, the analyst went on to label Nvidia as “the AI company,” highlighting its continuous investments in AI technology and its culture of innovation as key strategic advantages. This characterization underscores Nvidia’s pivotal role in shaping the future of AI and its potential for further growth and development in the market.
A strategic advantage for Nvidia
The analysts’ stance appears well-founded, particularly when considering Nvidia’s recent fiscal 2024 fourth-quarter results, which revealed a record expenditure of $2.46 billion on research and development (R&D). This investment trend culminated in a yearly R&D spending total of $8.68 billion, also setting a record for the company. Despite chatter about impending competition in the AI processor space, Nvidia’s consistent history of outpacing rivals and its substantial ongoing R&D investments suggest it will maintain its leadership position.
Moreover, Nvidia’s current valuation stands at 74 times trailing 12-month earnings, prompting some to question its price relative to its earnings potential. Analysts anticipate Nvidia’s earnings per share (EPS) to reach $24.46 in 2025 and $29.82 by 2026. If the projected price target materializes, this would lower Nvidia’s price-to-earnings (P/E) ratio to 48 next year and 39 the following year, implying that the stock may be undervalued given its growth prospects.