This NVDA stock forecast article was written by Anastasia Makuyev – Quantitative Analyst at I Know First.

Summary

• Nvidia has a history of seasonal success during Q4. This year, I expect Nvidia to outperform their projected Q4 earnings of $6,051 million.
• Nvidia is partnering with large tech companies such as AT&T, and is transitioning from gaming to AI to meet consumer demand. I expect this to lead to long-term success for Nvidia.
• A machine learning algorithm designed to predict NVDA’s movement confirmed these predictions and helped us to set a PT of $377.91 in the coming year. I suspect that NVDA’s high PB ratio is not a serious indicator of the fact that it is overvalued, and the company’s performance will outweigh any doubts.

NVDA Stock Forecast: I Know First’s Successful Past Predictions

On February 20, 2023, Meiru Zhong – Financial Analyst at I Know First released an article summarizing her thoughts on the movement of NVDA’s stock price in the coming year. In tandem with her prediction, NVDA stock gained 190% in four months, as seen below.

While predicting the movement of a stock price over the course of a year is no easy feat, Zhong attributed her successful prediction of NVDA’s stock price movement to the following factors: Nvidia’s leadership in gaming, their predicted Quarter 4 earnings, and their innovation in GPUs and cloud computing, as well as to the I Know First algorithm. Examining these key indicators separated valuable information from noise when decision-making, and as a result, Zhong was successful in her prediction.

Leadership in Gaming and the Political Game

Financial analyst Meiru Zhong considered several factors when making her prediction about NVDA’s stock movement. First, she analyzed the company’s profitability, noting that NVIDIA achieved a gross margin of 58% and a net margin of 21% in the first nine months of FY2023. This places the company in the top 20% of the semiconductor industry. Zhong expected NVIDIA’s EPS to grow from $2.97 to $3.27 in the next period, indicating positive financial performance.

Next, Zhong examined the performance of NVDA’s specialized markets. The Data Center segment saw significant growth of 55% compared to the previous year, driven by AI adoption across industries. However, the Gaming segment experienced a decline of 20% due to lower demand expectations and the reduced utility of GPUs for cryptocurrency mining. Professional Visualization also saw a decrease of 10%, while Automotive showed growth of 38%. The OEM and Other market experienced a significant decline of 62%.

Zhong also took external factors into account. She highlighted the impact of US-China trade tensions, which led to new license requirements and restrictions on exports to China and Russia. These restrictions could have adverse effects on sales and benefit competitors not subject to the same restrictions. Additionally, she predicted that closure of NVIDIA’s business operations in Russia would have an immaterial impact.

IT and Zhong’s Success

Lastly, Zhong considered the market opportunity and valuation of NVDA. The worldwide IT spending is projected to increase, offering significant opportunities for NVIDIA’s products and services across various industries. The DCF analysis predicts an intrinsic stock price of $291 with upside potential for investors. Technical analysis, including moving averages and chart patterns, also supports a bullish outlook for NVDA. Analyst recommendations and AI predictions further reinforce the positive sentiment towards NVDA stock.

In conclusion, based on her analysis, Zhong takes a buy-side on NVDA stock, emphasizing its strong fundamentals, positive future developments, and potential for growth in the market. In time, we saw that worldwide IT spending did in fact increase, and that her bullish prediction was a successful one.

All three of these events confirm Zhong’s theory of NVIDA’s performance, indicating that she correctly identified the sectors in which NVIDA would dominate.

Looking Ahead:

In this article, I hope to examine similar key factors in order to reach a decision about NVDA’s stock price over the coming year, in 2023-2024. We will examine Nvidia’s Price-Book ratio, their quarterly revenue, and their plans for the upcoming year in order to make an informed decision, then confirm or deny our findings by employing machine learning to predict future price movement based on 23 years of data.

Noticing Patterns in Quarterly Revenue:

Based on promising industry trends and strong partnerships, we anticipate significant revenue growth for Nvidia in the coming year. Considering the historical spike in Nvidia’s stock price during the fourth quarter due to increased consumer purchasing power during the holiday season, as well as a time series forecast performed, we expect the company to surpass its Q3 and Q4 revenue guidance of $5,931 million and $6,051 million, respectively.

Furthermore, with the rise of AI and data-driven technologies, we expect the demand for high-speed GPUs to surge, providing a significant advantage for Nvidia. As more companies adopt these technologies, Nvidia’s position as a leader in the industry will become even more valuable, which will further bolster its growth potential.

Moving into the Age of AI:

We are poised to enter a new era of machine learning, where 300 million jobs are expected to be lost due to artificial intelligence by Goldman Sachs. Consequently, we expect demand for high-speed GPUs to skyrocket. NVIDIA, being the leading producer of GPU chips capable of performing high-speed computations alongside fields such as AI, data centers, and cloud business, is positioned to benefit greatly from this transition. In fact, the company has already secured a major partnership with telecommunications giant AT&T; AT&T is utilizing the NVIDIA AI Enterprise software suite, including the RAPIDS Accelerator for Apache Spark, to enhance its data processing capabilities. By leveraging AI, AT&T can optimize service-fleet routing, process data efficiently, and develop digital avatars for employee support and training.

Furthermore, NVIDIA has been developing generative AI services to accelerate biology research and development, positioning the company to become a pioneer in various fields. Concurrently, it’s clear that NVIDIA AI will soon become as or more widespread as ChatGPT, as an effective tool used to create solutions in a myriad of industries.

Additionally, Nvidia’s Jetson AGX Orin is pioneering change in energy usage, an invaluable asset during these tumultuous times in which the world is steadily but painstakingly marching towards renewable energy sources. Jetson AGX Orin demonstrated shocking performance and power efficiency increases.

The demand for extraordinary computational power is now shifting from passionate gamers and advanced tech companies to everyday consumers, resulting in an overhaul in the way that large companies address labor shortages. We have seen an unprecedented uptick in cost-cutting layoffs from companies such as Amazon and Meta, and we believe this is in preparation for the restructuring of their operations towards a model driven by high-performance computing, a demand which NVIDIA will be quick to fill in the coming year.

Does It Matter If a Stock is Overvalued If Everyone Overvalues it?

According to GuruFocus, as of June 12, Nvidia’s current price-to-book (PB) ratio stands at 39.10, nearing its 10-year high of 39.66. It is evident that NVDA is currently overvalued by investors. However, the question remains: how likely is this to change in the coming year? Nvidia’s PB ratio has historically risen on a yearly basis, driven by the seasonal surge in holiday video game purchases. As a result, I anticipate that the PB ratio will decline in the coming months before rising again as the holiday season approaches.

Nevertheless, if Nvidia continues to make innovative strides in AI and Machine Learning, we can expect it to gain more popularity among investors. Further advancements and partnerships with large tech companies to revolutionize energy and performance could propel Nvidia’s PB ratio even higher as more investors take notice. Consequently, Nvidia’s stock price may skyrocket beyond its true value.

While some analysts express concerns about Nvidia’s current valuation, it is important to note that panic within the tech investment community, driven by the Federal Reserve’s interest rate hikes earlier this year to combat inflation, may contribute to the perceived overvaluation. Therefore, I maintain my belief that tech giants will follow AT&T’s lead in partnering with Nvidia to optimize operations and safeguard against the predicted recession. This positions Nvidia as a strong investment candidate for the upcoming fiscal year, as the company is expected to remain at the forefront of the tech industry even if the sector faces challenges. For reference, here is how NVDA stands against its competitors:

NVDA Stock Forecast: Machine Learning Algorithm

To confirm or refute my theories, I performed a time series analysis and utilized a machine learning algorithm to predict the movement of NVDA stock price over the coming year. I used Scikit-learn’s Ridge regression, which is a machine learning algorithm that can be utilized for predicting stock market behavior. It belongs to the family of linear regression models but incorporates a regularization term to handle potential issues such as multicollinearity and overfitting. Ridge regression is the regularized form of linear regression.

Further, Ridge Regression is a model-tuning method which can analyze data which suffers from multicollinearity. This is when two or more independent variables have a high correlation with one another in a regression model, which otherwise makes it difficult to determine the individual effect of said variables. I trained the model on all of NVDA’s data since 1999, and asked it to predict the movement of the NVDA stock in the upcoming year. It confirmed what the I Know First Algorithm has been telling us– that NVDA is set to rise in the upcoming year.

While algorithms are imperfect and cannot predict future stock prices without error, they can be valuable tools when combined with human judgment for decision-making. It is worth noting that the current deviation between the algorithm’s prediction and the actual stock price is likely due to NVDA’s current overvaluation. We can expect the stock to experience a slight drop in mid-October before climbing once again as Q4 approaches. This drop can be explained by the tumultuous macroeconomic environment as of recently, but a rebound is to be expected. With these factors in mind, I would like to set a price target of $377.91, which I firmly believe NVDA will make contact with within one year.

NVDA Stock Forecast: Conclusion

Considering our expectations of Nvidia outperforming their projected Q3 and Q4 earnings in 2023, we anticipate a drop in the stock price due to its current overvaluation, followed by a rebound driven by Nvidia’s Q4 performance. Nvidia’s remarkable innovations, strong partnerships such as the one with AT&T, and advancements in the tech industry make it a compelling long-term investment opportunity.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.

Past Success with NVDA Stock Forecast

I Know First has been bullish on the NVDA stock forecast in the past. On March 8^th, 2023 the I Know First algorithm issued a forecast for NVDA stock price and recommended NVDA as one of the best computer stocks to buy. The AI-driven NVDA stock prediction was successful on a 3-month time horizon resulting in more than 65.36%.

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Please note-for trading decisions use the most recent forecast.