Anyone who expected Nvidia (NASDAQ:NVDA) to stall out after last year’s big rally is sorely disappointed. The stock is up 38% just one month into the new year. With shares trading at a lofty premium ahead of earnings, it’s tempting to think all the good news is priced in. Even the slightest hiccup could send shares tumbling.
I’ll make an NVDA stock forecast that the naysayers will be disappointed again. The early reports from other tech stocks are filtering in and business is booming, at least where artificial intelligence is concerned. Since that is driving Nivida forward, look for the earnings report later this month to confirm the good news. Expect to see the chip maker hit a $2 trillion valuation.
NVDA Stock Forecast: Earnings Matter
With an 80% market share, no one can touch Nvidia in the graphics processing unit (GPU) market. Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC) will undoubtedly siphon away some customers soon as their own AI chips filter through the market but it’s a large enough field that can support several players. Nvidia, though, will maintain its wide competitive moat.
AI accelerators, including GPUs, are going to remain in high demand for the foreseeable future. Especially for hyper-scalers, or supersize cloud services providers such as Amazon (NASDAQ:AMZN), Google, and Microsoft (NASDAQ:MSFT), need them and more for their data centers.
Including Meta Platforms (NASDAQ:META), these four horsemen of the cloud account for 78% of total capacity.
Nvidia CFO Collette Kress told analysts, “The enterprise wave of AI adoption is beginning.”
The necessity of an AI-optimized infrastructure where enhanced processing technology and data center capacity will keep Nvidia’s premiere H100 Tensor Core GPUs at the forefront of every cloud platform. These providers were the engine behind half of Nvidia’s data center segment growth and that’s likely to be the case this quarter.
Yet Nvidia is more than just this one business as big as it is and as fast as it’s growing. As CEO Jensen Huang told investors, all aspects of its business “are all growth engines in full throttle.”
Where AI Goes Next
The adoption of AI intertwines with Nvidia’s immediate future and how it links to other markets. Gaming, for example, is where the chip maker really gained a following because its GPUs were able to handle the complex processing tasks required. As gaming evolves with AI infusing the market with new capabilities, Nvidia predicts AI-enhanced computing will be a key development.
HP (NYSE:HPQ) expects to release the first AI PC this year. A renaissance in PC sales may envelop the market, as AI could create a whole new upgrade cycle. But don’t expect it to start until 2025 at the earliest. Augmented and virtual reality melding with the PC could also take sales to heights that haven’t been seen for years.
Expect Apple‘s (NASDAQ:AAPL) new Vision Pro headset to change gaming, work, entertainment, and more. Few can afford the $3,500 price point, but it could drive sales of Meta’s more affordable Quest 3 headset. They will probably need upgraded GPUs to handle gaming’s processing demands, but that’s another opportunity for the chip maker.
Crossing the threshold
Nvidia’s revenue and earnings growth over the past year helped fuel the rally in its stock. They also caused soaring valuations for the chip maker. However, there is a risk that having come so far, so fast Nvidia’s stock falters that any miscue could cause the stock to fall.
I don’t see that happening. Instead, the chip maker’s earnings report will catapult it to a $2 trillion valuation.
At around $680 per share, Nvidia is sitting less than 20% under the threshold. Meta’s stock soared 20% when it reported earnings the other day. Amazon jumped 8% on its earnings report as AI powered new growth. With Goldman Sachs setting a new $800 per share price target for Nvidia, it appears the investment bank sees $2 trillion in the cards too.
A slowdown will eventually happen. It just won’t be now.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.