Why Nvidia is still considered worth over $1 trillion

Investors still believe Nvidia (NVDA) will have a very hot summer as it cleans up in the generative AI arms race with its performance lead in chips.

This is even with growing geopolitical tensions between the United States and China, which has new implications for technology.

The chip giant’s stock is up 3% so far in July, outperforming the Nasdaq Composite’s 1.2% gain. Shares have now risen 200% on the year, taking the Jensen Huang-led tech creation to a market capitalization of more than $1 trillion.

Nvidia initially hit the $1 trillion market cap level on May 30.

“We continue to see an upward EPS of $10 in [calendar year 2023] for Nvidia (against consensus of $7.49) our scenario implying growth to $30 by 2027 (only 20% acceleration),” Evercore ISI analyst CJ Muse wrote in a new client rating with positive AI-related headlines that have supported stock momentum throughout the year (and likely supported the [semiconductor sector index] SOX higher as well).”

Nvidia is considered pole position in the AI ​​space due to its chips that power OpenAI’s ChatGPT platform. The company has also signed high-level generative AI chip deals with ServiceNow (NOW) and Snowflake (SNOW).

Strong demand triggered a major upward reset in Nvidia’s forecast on May 24. Nvidia said it expects second-quarter revenue to be around $11 billion, plus or minus 2%. Wall Street was anticipating $7.2 billion.

The Street currently forecasts $11.02 billion in sales for Nvidia’s second quarter, according to data from Yahoo Finance.

NVIDIA CEO Jensen Huang speaks during a press conference at Computex 2023 in Taipei on May 30, 2023. (Photo by Sam Yeh/AFP) (Photo by SAM YEH/AFP via Getty Images)

NVIDIA CEO Jensen Huang speaks during a press conference at Computex 2023 in Taipei on May 30, 2023. (Photo by Sam Yeh/AFP) (Photo by SAM YEH/AFP via Getty Images)

Nvidia’s shocking outlook prompts Wall Street to receive important and positive guidance from the company when it reports its results on August 23.

Analysts expect Nvidia to add another $1 billion in sales between the end of the second quarter and the end of the third quarter in October.

Despite fundamental trading momentum and investor love for the stock, Nvidia’s stock price hasn’t been teflon in recent weeks.

The company’s market capitalization fell back below the $1 trillion level following reports that the United States plans to impose new restrictions on shipments of AI chips to China. Reports suggest that export restrictions could start in July.

Nvidia chief financial officer Colette Kress told a conference in late June that export restrictions would “result in a permanent loss of opportunity for American industry.”

However, analysts remained loyal to the company and investors pushed the valuation back above $1 trillion.

About 88% of sell-side analysts who cover Nvidia rate the stock buy with an average price target of $470. If Nvidia achieves this price target, the company’s market capitalization would be approximately $1.24 trillion.

Pros say Nvidia is in too lucrative a demand zone for investors to ignore the stock.

“The recent step-wise increase in the company’s data center revenue outlook, however, suggests that the company has entered a new phase of growth driven by the emergence and proliferation of generative AI,” Toshiya said. Hari, an analyst at Goldman Sachs.

Brian Sozzi is the editor of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Advice on transactions, mergers, militant situations or something else? Email brian.sozzi@yahoofinance.com

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