6 reasons why Nvidia will jump another 21% from record highs, according to Goldman Sachs
- Nvidia stock surged 4% on Monday to a record high, and Goldman Sachs thinks the gains could continue.
- Goldman increased its Nvidia price target to $800 on Monday, representing potential upside of 21%.
- Here are the 6 reasons that give Goldman Sachs increased confidence in its bullish outlook of Nvidia.
Nvidia's 218% rally over the past year isn't stopping Goldman Sachs from increasing its price target on the semiconductor company.
In a Monday note, Goldman Sachs raised its Nvidia price target from $625 to $800, representing potential upside of 21% from Friday's close. Nvidia stock jumped as much as 5% on Monday to a record valuation of $1.7 trillion.
Goldman Sachs analysts believe that Nvidia's Data Center revenue won't "drop off" in the second half of 2024 as it previously forecast.
Instead, according to Goldman Sachs, Nvidia will consistently increase its Data Center revenue through the first half of 2025 thanks to "continued spending on generative AI infrastructure by the large cloud service providers, a broadening customer profile, and multiple new product cycles."
Recent commentary from last week's earnings reports of the major cloud providers, including Amazon, Microsoft, and Alphabet, suggest to Goldman Sachs that Nvidia still stands to benefit from accelerated spending on AI-enabling GPU chips, like the H100.
"We are encouraged by various data points from the broader eco-system that point to sustained strength in demand for accelerated computing," Goldman Sachs analyst Toshiya Hari wrote.
These are the six reasons Goldman Sachs is growing more bullish on Nvidia.
1. "Early evidence of AI monetization at the likes of Microsoft (6% point contribution toward Azure growth in the December quarter + Copilot adoption) and Meta Platforms (increased monetization across Reels, messaging and commerce)."
2. "Constructive commentary on AI-related capital spending by the hyperscalers (note Meta increased its 2024 capex guidance from $30-35bn prior to $30-37bn)."
3. "Super Micro's forward guidance that implies an acceleration in its sequential revenue growth rate from 7% qoq in 1QCY24 to 24% qoq in 2QCY24 at the midpoint of guidance."
4. "AMD's positive revision to its 2024 Data Center GPU revenue outlook to ~$3.5bn from $2bn+ as of three months ago."
5. "Marvell's recent upbeat comments regarding its optical DSP and custom compute businesses (note that we revised up our FY2025-26 Data Center segment revenue forecasts by 5%)."
6. "Nvidia's reiteration at CES of its conviction in growing Data Center revenue beyond CY2024 — a view predicated on strong visibility as it pertains to capital spending patterns at the large cloud service providers."
And while Nvidia does face growing competition from AMD, Hari believes Nvidia will remain "the industry gold standard for the foreseeable future" thanks to its powerful hardware, complementary software products, and its rapid pace of innovation.
Hari wrote that based on supply chain feedback, he expects Nvidia to ramp up production of its next-gen H200 hyperscaler in the second quarter of 2024, the B100/B40 to enter production in the second half of 2024, and the X100/X40 to be launched in 2025.
"Our recent conversations with companies throughout the supply chain suggest that GPU manufacturing capacity will increase on a sequential basis throughout 4QCY24, with a potential acceleration in sequential growth in 3QCY24," Hari said.
Goldman Sachs isn't alone in its thinking, with Bank of America increasing its price target on Nvidia to $800 last week based on the idea that demand for AI is still in its infancy.