The impressive rise in the price of Nvidia (NASDAQ:NVDA) stock in 2023 can largely be attributed to the artificial intelligence (AI) mega-trend. However, it would be a mistake to assume that the stock price has fully accounted for all AI catalysts.
While the AI mania has primarily focused on generative AI, particularly the technology behind platforms like OpenAI’s ChatGPT, Nvidia’s AI potential extends beyond this specific market. As the leading provider of chips used to power generative AI, Nvidia is benefiting greatly from the growing demand in this area.
But there are other AI-related user markets that will emerge in the years to come, further solidifying the long-term bullish case for Nvidia. As we recently discussed, big tech companies are scrambling to enter the burgeoning generative AI market, and Nvidia, being the supplier of the essential AI chips, is currently in a favorable position.
This trend has already had a positive impact on Nvidia’s earnings results, with management even raising their quarterly revenue guidance. However, despite the threefold run-up in price, it would be inaccurate to say that the stock price has fully captured Nvidia’s AI potential.
Not only does the company have the potential to grow chip sales, but it can also create a steady subscription-based revenue stream due to the soaring demand for generative AI computing power. Additionally, the rise of other types of AI opens up even more possibilities for demand growth, which skeptics fail to grasp.
Although the skeptics may have anticipated a halt in Nvidia’s stock price after reaching $400 per share, the reality is that the company is holding steady around $425 per share. While a slight pullback or market correction cannot be ruled out, there is still significant room for Nvidia shares to rise in the long term.
This is why Tigress Financial Partners’ Ivan Feinseth recently set an extremely high price target of $560 per share for Nvidia. Feinseth believes that Nvidia is one of the best ways to capitalize on the accelerating adoption of AI across various technologies and applications.
In addition to the AI catalysts, a rebound in gaming and PC chip demand further supports Nvidia’s potential for future growth. Despite sporting a rich valuation of 54.6 times forward earnings, Nvidia has multiple factors at play that could lead to an earnings growth bonanza, sustaining and adding to its valuation.
This level of confidence is not unique, as long-term sell-side earnings forecasts for Nvidia predict a tripling of earnings by the fiscal year ending January 2026. Considering Nvidia’s AI potential beyond just generative AI, there is even more reason to consider investing in NVDA stock today.
In Portfolio Grader, NVDA stock earns an A rating, further reinforcing its strength as an investment opportunity.
