In its latest report released on Tuesday, Goldman Sachs stated that although Nvidia's stock has risen by 88% this year after more than doubling last year, there is still a lot of room for growth in the future.
The bank has raised Nvidia's target stock price from $1000 to $1100, which means the stock still has about 22% potential for growth compared to its current level.
Goldman Sachs stated that considering Nvidia's rapid growth rate and the persistence of this growth trend in the coming years, the valuation of the company's stock remains relatively attractive compared to its peers.
Goldman Sachs analyst Toshiya Hari said, "We expect the upward correction in earnings per share to drive the stock up again, especially considering Nvidia's current P/E ratio of 35 times, which is only 36% premium compared to the stock portfolio we cover, and its median premium over the past three years is 160%."
He believes that AI remains the main driver of Nvidia's growth, and expects the performance of data centers in the second and third quarters of this year to benefit from strong demand for artificial intelligence related computing and networks. The momentum from artificial intelligence ecosystems and product releases such as H200 and Spectra-X also supports this outlook.
Goldman Sachs now expects quarterly growth in data center revenue for Q2, Q3, and Q4 to be 10%, 17%, and 5%, respectively.
AI spending will continue to "output"
The recent comments from major technology giants have inspired Harit. These technology companies stated during the earnings conference call that after increasing investment in 2024, they will invest more funds in artificial intelligence infrastructure in 2025.
Goldman Sachs predicts that four technology companies, Microsoft, Google, Amazon AWS, and META, will invest as much as $177 billion in cloud computing this year, far higher than last year's $119 billion, and will continue to increase to $195 billion in 2025.
Note: The four major technology giants' cloud computing capital expenditures by 2025 (Amazon only refers to AWS business), from left to right, are Microsoft, Google, AWS, META, and their total values
Goldman Sachs believes that these investments will provide momentum for Nvidia's continued growth in revenue and profits, especially with the release of its next generation Blackwell AI chip later this year.
The tech giants have made positive comments as follows:
TSMC reiterated its short-term and long-term outlook for the artificial intelligence market and expects revenue from AI server processors to more than double year-on-year.
2. Supertech giants like Amazon and Meta have expressed or hinted that although the capital investment base related to artificial intelligence is high in 2024, it may continue to increase in 2025.
3. Some large-scale AI companies and enterprise software companies have emphasized early signs of AI monetization.
AMD has raised its 2024 revenue forecast for its GPU chip Mi300, which focuses on artificial intelligence, from $3.5 billion to $4 billion.
5. Microelectronics reported strong revenue growth due to increased demand for artificial intelligence servers.
The opponent is not enough to defeat Nvidia
Goldman Sachs pointed out that although AMD's new chips and self-developed chips from other large technology companies have begun to erode Nvidia's GPU business, this is not enough to crush Nvidia.
"We believe that Nvidia will continue to maintain its position as an industry benchmark in the foreseeable future, due to its competitive advantage in hardware and software capabilities, decades of established installation infrastructure and ecosystem, and its pace of innovation in the coming years," Hari said.