To The Moon

$NVIDIA Corp(NVDA)$ has transformed itself from what used to be a cyclical stock to a secular growth story. At least, that is what seems to explain the stock’s meteoric rise in less than five years time and the rich multiple that it currently trades at.

Nvidia Meteoric Rise From 2020 to Above $1,200 Before Stock Split In 2024

NVDA started 2020 trading at around $59 per share. In 2022, we saw Nvidia hitting around $235 per share, representing a 300% gain in just over two years. Then we saw Nvidia closing above $1,200 when it went for its stock split in 2024.

If we look at how analyst has given the NVDA's forecast earnings growth at 22.5% per year which is above the savings rate of 2.4%.

Nvidia's earnings which is at 22.5% per year are forecast to grow faster than the US market at 14.8% per year. NVDA's high growth earnings are expected to grow significantly over the next 3 years.

NVDA's revenue at 22.1% per year is forecast to grow faster than the US market which is at 8.7% per year. NVDA's high growth revenue at 22.1% per year is forecast to grow faster than 20% per year.

Earnings Guidance Surpassed For Continuous 5 Quarters

NVDA's stock price has been rising because the company is a key beneficiary of the rise of generative AI. Mckinsey defines generative AI as "algorithms (such as ChatGPT) that can be used to create new content."

In the short term, NVDA disclosed at its shareholder/analyst conference on 23 March, 2023, that it is "seeing stronger demand from our hyperscale customers for all of our data center platforms as they focus on generative AI,".

I think we would be expecting similar outlook in its upcoming stockholders meeting scheduled for 26 June 2024. In March 2024, Nvidia posted another set of staggering growth figures, including revenue that was up 262% from a year before, data-center revenue that was up 427%, and adjusted earnings per share that were up 461%.

Nvidia's fiscal first-quarter revenue of $26 billion beat the consensus view of $24.6 billion and also met bullish investor expectations that analysts said were around the $26 billion range. There was a similar trend with Nvidia's guidance, which at $28 billion was ahead of the $26.7 billion FactSet consensus and in line with what analysts said the buy side was looking for.

Meanwhile, adjusted gross margins reached a record level of 78.9%, though the company anticipates a comedown to 75.5% in the current quarter.

AI Inference Demand Major Growth For Nvidia For The Long Run

For the long run, AI inference is expected to be a major growth driver for Nvidia Corporation. The main battlefield of AI chips is shifting towards a larger and more competitive field - inference.

The CFO of NVIDIA has highlighted before in February 2024 that in NVIDIA's largest revenue-generating data center department, over 40% of the business last year was related to deploying AI models, rather than training - a significant sign of the AI chip market shifting.

The demand for chips to train AI models has propelled NVIDIA to become the "new king of chips". With the industry rapidly evolving, the next market focus will be on chips used for real-time inference.

Compared to training chips, inference chips have lower requirements for power consumption and cost, which also means that the competitive market will become more intense. Can NVIDIA's "new king" status continue?

Nvidia Price Target In Supertrend Upper Band

If you have been following how Nvidia have traded over the last few weeks after its stock split, we could see that Nvidia have been trading in the upper band of the supertrend. The next price target is at $145.

This target can be obtained easily given that the demand for Nvidia stock and also their GPUs demand in response to AI inference have been growing. What would be interesting is how can we know if we are on the way to $250 by end of Q3 2024?

If we looked at the month growth, Nvidia looks to be in a consistent momentum to get around 33.54% in stock price increase. In the chart, we are seeing a 33.54% increase from May to June.

By giving some estimate discount on the growth, let us take a 25% increase per month till end of Q3 2024, we could be seeing Nvidia hitting above $250comfortably.

But this is provided that Nvidia does not face any new competition from other chips maker.

Summary

If we looked at how Nvidia demand and growth have been moving, I would say that Nvidia have been giving consistent growth monthly, to be more cautious, I would be looking at around 25% growth instead of 30%.

So we could be seeing Nvidia hitting above $250 by end of Q3 2024.

Appreciate if you could share your thoughts in the comment section whether you think Nvidia would continue to perform at a consistent growth, and $250 price target is possible by end of September 2024.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.