Nvidia, a prominent semiconductor maker, has seen a temporary loss of momentum in recent months. However, experts from Citi and Goldman Sachs suggest that this should not deter investors, as the company is on the verge of launching its next generation of graphics-processing units (GPUs).
While Nvidia stock (ticker: NVDA) has already increased in value nearly threefold this year, the share prices have remained relatively stagnant in recent times. It appears that investors have already factored in the success of Nvidia’s H100 GPU, which is set to become a highly sought-after chip for artificial intelligence applications.
Nonetheless, Goldman Sachs believes that investors are undervaluing Nvidia’s significance as the primary supplier of the essential tools (“shovel supplier”) driving the AI boom. Toshiya Hari of Goldman Sachs has included Nvidia on the Conviction List and has set a target price of $605 for the stock over the next 12 months.
As of premarket trading on Monday, Nvidia shares were up 0.7% at $438.
Citi analyst Atif Malik further suggests that Nvidia’s potential gains could be unlocked with the release of its next-generation B100 (also known as Blackwell) GPU in the first half of next year. While Nvidia typically follows a production schedule that would release the AI chip in the second half of 2024, the company might expedite its timeline to meet the growing demand and beat out competitors.
Malik highlights that the B100 GPU has the potential to be a game changer in the field of AI, surpassing even the H100 GPU’s impact at its launch. This technological marvel could lead to rapid adoption and subsequently boost Nvidia’s average selling prices (ASPs), sales, and margins.
A critical factor contributing to this advancement is if Nvidia employs Taiwan Semiconductor Manufacturing’s (TSM) cutting-edge 3-nanometer manufacturing process. Additionally, adopting ‘chiplet’ stacking technology, which combines multiple smaller chips, could further enhance the B100’s capabilities.
Atif Malik maintains a Buy rating on Nvidia shares with a target price of $630. This valuation is based on a price-to-earnings multiple of 35 times the company’s projected 2025 earnings.