Nvidia to Surge Another 22%: Goldman Sachs Remains Bullish Despite Near-Doubling in 2024

Nvidia's meteoric rise this year shows no signs of slowing down, according to Goldman Sachs. The investment bank projects the stock to climb another 22%, even after an impressive 81% rally year-to-date.

Goldman Sachs has raised its price target for Nvidia to $1,100 from $1,000, citing the company's robust growth trajectory and relatively attractive valuation compared to peers. This new target offers a substantial upside from current levels.

Positive Earnings Revisions Fuel Growth Outlook

In a note released on Tuesday, Goldman Sachs analyst Toshiya Hari emphasized Nvidia's favorable valuation in light of its rapid growth:

"We see positive EPS revisions driving another leg up in the stock, especially with NVDA trading at 35x or only a 36% premium to our coverage universe vs. its past 3-year median premium of 160%."

Hari added that Nvidia's valuation remains compelling compared to its growth rate and the durable trends expected in the coming years. Notably, recent earnings calls from major tech companies suggest even greater investments in AI infrastructure by 2025, following an already elevated investment cycle in 2024.

Key Factors Supporting Nvidia's Continued Upside

Several key data points bolster the view that AI spending will extend beyond 2024, strengthening Nvidia's growth potential:

1. TSMC's AI Market Outlook: TSMC reiterated its strong near- and long-term outlooks for the AI market, anticipating that server AI processor revenue will more than double year-over-year.

2. Tier-1 Hyperscalers' Investments: Major cloud providers like Amazon and Meta Platforms signaled increased AI-related capital investments in 2025.

3. AI Monetization Signs: Several AI hyperscalers and enterprise software companies highlighted early signs of AI monetization.

4. AMD's Raised Revenue Guidance: AMD raised its 2024 revenue outlook for its AI-focused GPU chip, the Mi300, to $4 billion from $3.5 billion.

5. Super Micro Computer's Record Growth: Super Micro Computer reported strong revenue growth and a record backlog due to heightened demand for AI servers.

Competitive Edge Despite Rising Competition

While competition is encroaching on Nvidia's GPU business through AMD's new chip and in-house designs from tech giants, Goldman Sachs believes Nvidia will maintain its dominant position. Hari explained:

"We believe Nvidia will remain the de facto industry standard for the foreseeable future given its competitive advantage that spans its hardware and software capabilities, as well as the installed base and ecosystem it has built over multiple decades."

The next-generation Blackwell AI chipset, set for release later this year, is expected to further solidify Nvidia's industry leadership. The company will report its earnings results on May 22, providing more clarity on its growth prospects.

Final Thoughts

Nvidia's growth story remains compelling for investors, with Goldman Sachs confident in the company's ability to deliver sustained returns. Positive earnings revisions, continued AI investment from tech giants, and Nvidia's dominant position in the industry are likely to drive the stock higher in the foreseeable future.

Stay tuned for Nvidia's earnings report on May 22, which will shed more light on the company's performance and future outlook.