This NVDA Stock Forecast article was written by Miles Grauberd – Financial Analyst at I Know First.

Highlights

• NVIDIA achieved 55.26% net margin in Q2 of 2024
• NVIDIA EPS achieved 0.68 EPS in Q2 of 2024 and expected to hit an EPS of 0.74 in the next quarter
• Total annual Revenue is expected to double by February 2025 from $60 billion to $120 billion
• Q3 Revenue expected to hit $32.5 billion

Overview

NVIDIA Corporation (NVDA) is a global technology leader renowned for its design of graphics processing units (GPUs), application programming interfaces (APIs), and system-on-a-chip units (SoCs). NVIDIA has grown tremendously due to the high demand for its GPUs in AI technology, particularly through its CUDA platform, which enables developers to leverage NVIDIA’s GPUs for building advanced AI models. Many industries, including AI and machine learning, gaming, editing, and crypto mining, rely on these GPUs to achieve peak performance, positioning NVIDIA at the forefront of technological advancement.

Amazing Hardware and Even Better Performance

In the second quarter of fiscal year 2024, NVIDIA reported revenue of $30.04 billion, reflecting a 15.36% increase from the previous quarter and surpassing the estimate of $28.74 billion. This impressive revenue performance resulted in a net profit of $16.99 billion and an earnings per share (EPS) of $0.68, exceeding the estimated $0.65. NVIDIA also achieved a record quarterly data center revenue of $26.3 billion, marking a 16% increase from the first quarter and a remarkable 154% year-over-year growth. Additionally, NVIDIA doubled its revenue from major countries that purchase its products, underscoring significant growth. The price-to-earnings (P/E) ratio for Q2 stood at 53.08, reflecting a 3.4% increase from Q1 but a 53% decrease compared to the previous year.

As the leading force in the semiconductor industry and briefly the largest company by market cap, NVIDIA has had an exceptional year. The company holds a commanding position over its competitors, with its GPUs far surpassing those of Intel and AMD in performance. This dominance drives demand across various sectors, including gaming, cryptocurrency mining, and artificial intelligence, where enthusiasts and professionals alike seek NVIDIA’s cutting-edge technology. Despite the premium price, such as the RTX 4090 priced around $1,600, many consider it a worthwhile investment for the unparalleled performance it delivers. The RTX 4090 stands as the fastest graphics card available, reinforcing NVIDIA’s reputation for excellence.

Why Did Nvidia go up? Simple Answer –  Their Product is Superior 

When comparing NVIDIA’s GeForce RTX 4090 GPU to AMD’s Radeon RX 7900, NVIDIA’s offering demonstrates a significant performance advantage. At 1080p resolution, whether on medium or ultra settings, the RTX 4090 surpasses the Radeon RX 7900 by a narrow margin. The performance gap becomes more pronounced at 1440p resolution, where the RTX 4090 delivers notably better results. At 4K resolution, the RTX 4090 truly excels, providing 27.4% more frames per second (fps) than the Radeon RX 7900. Additionally, it is worth noting that NVIDIA’s second-best GPU also performs almost as well as, if not better than, AMD’s top model across various resolutions.

In the realm of ray tracing, which is not yet widely utilized in many games but remains an important feature, NVIDIA’s GPUs outshine AMD’s offerings. Specifically, nine of NVIDIA’s GPUs outperform AMD’s best model in ray tracing capabilities, highlighting NVIDIA’s edge in this aspect. Beyond performance, NVIDIA also excels in software stability, with professional applications like CUDA and advanced streaming capabilities. In Q1 2023, NVIDIA held a GPU market share of 84%, which increased to 88% by Q1 2024, indicating significant growth. In contrast, AMD’s market share remained at 12%, while Intel’s share plummeted from 4% to a mere 0%.

Graphics Hierarchy:

 Ray Tracing Hierarchy: 

Who are their biggest buyers of their products?

In 2023, NVIDIA experienced remarkable growth in data-center GPU shipments, reaching a total of 3.76 million units—an increase of 1 million units compared to 2022. Despite this surge in sales, NVIDIA’s data-center GPU market share remained steady at 98%, reflecting consistent dominance in the sector. Major consumers of NVIDIA’s GPUs include Microsoft and META, who collectively invested $9 billion in NVIDIA’s H100 GPUs, acquiring approximately 150,000 units each. Microsoft plans to expand its GPU inventory to 1.8 million by the end of 2024, while META aims to purchase 350,000 H100 GPUs within the same timeframe. Other significant clients include Google and Amazon. Together, Microsoft, META, Amazon, and Google account for 40% of NVIDIA’s revenue, as reported by Bloomberg. However, a potential challenge looms as rumors suggest that these key clients may be developing their own AI chips, which could significantly impact NVIDIA’s growth prospects, according to reports from the NYT.

How Long Will this Growth Continue For? 

To anticipate NVIDIA’s future trajectory, it is essential to examine past stock market rallies and their impacts. By analyzing these significant historical upswings, we can gain valuable insights into market dynamics and investor behavior, which are crucial for making informed predictions about NVIDIA’s potential direction. Understanding the patterns and drivers behind previous rallies provides a context for evaluating how current trends might influence NVIDIA’s performance in the coming periods.

A key driver behind NVIDIA’s impressive growth over the past year has been both the AI boom and the overall strength of the stock market. The surge in artificial intelligence technology played a pivotal role in fueling the stock market rally. During this period, the Nasdaq index surged from approximately 12,000 to 18,500, representing a substantial 54% increase. While NVIDIA, a prominent player on the Nasdaq, significantly contributed to this rise, it is crucial to recognize that this growth was also supported by the broader market’s upward momentum. Similarly, the S&P 500 index climbed from 4,000 to 5,800, achieving a 45% increase over the same period. Although NVIDIA experienced remarkable success, its performance was part of a broader market trend that saw both the S&P 500 and Nasdaq reaching new all-time highs. 

Nvidia, The New Cisco? 

Just as NVIDIA’s recent surge has been fueled by the AI boom, Cisco’s remarkable growth occurred during the dotcom bubble. Cisco’s stock experienced rapid appreciation, leading to numerous forward splits; a single share from March 1991 is now equivalent to 288 shares today. During this period, Cisco achieved exceptionally fast revenue and profit growth, briefly surpassing Microsoft as one of the world’s largest companies (Eerily similar to Nvidia now.) However, this impressive rise was short-lived. When the dotcom bubble burst, Cisco was not immune to the subsequent market downturn and saw its stock price plummet along with other tech companies. To this day, Cisco has yet to regain the all-time highs it reached during the peak of the dotcom era, echoing the current uncertainty surrounding NVIDIA.

NVDA Stock Forecast: Analyst’s Consensus: 

The market analyst’s forecast NVDA to be at an average $149.03, with a high of $202.79  and a low of $75.40. Analyst recommendations are strong, primarily “Buy,” supporting the anticipated upward trend. 

Outlook for 2025

In conclusion, I recommend a buy on Nvidia for 2025, as I anticipate the company will continue to thrive. Nvidia’s recent ascension to surpass Apple as the world’s most valuable company reflects strong momentum, bolstered by a notable decline in its P/E ratio, even as it reaches all-time highs. The company’s solid financial performance and pioneering advancements in AI technology provide a robust foundation for sustained growth in the coming year. However, it’s important to approach this investment with caution, given the current inflation of the AI bubble. The long-term viability of this trend will depend on companies successfully proving the profitability of their AI investments. Should the bubble burst, Nvidia’s upward trajectory could be impacted. It’s important to note that I Know First’s stock-picking AI shows a strong signal for one-year market trend forecasts, which reinforces my outlook on NVDA. The light green indicates a mildly bullish short-term forecast, while the darker green signifies a strong bullish signal for the one-year projection.