2 Reasons NVIDIA Stock Popped Yesterday With More Room to Run
NVIDIA Corporation’s NVDA meteoric rise in the last few years due to the advent of artificial intelligence (AI) came to a screeching halt last week after the company was plagued with antitrust issues (read more: NVIDIA Wipes Out $400B in Value: Buy, Hold, or Sell NVDA Stock?).
However, the possibility of a new U.S.-Saudi Arabia deal related to NVIDIA’s chips and encouraging comments on Blackwell chip production by CEO Jensen Huang lifted the semiconductor giant’s stock on Wednesday’s trading session by 8.2%.
NVIDIA Corporation Price and Consensus
NVIDIA Corporation price-consensus-chart | NVIDIA Corporation Quote
But can NVIDIA’s share price scale upward for the rest of the year and beyond? Let’s have a look –
US Mulls Over Allowing NVIDIA Chips for Saudi Arabia
On Wednesday, Semafor, citing credible sources, stated that the U.S. government is considering allowing NVIDIA to export its advanced chips to Saudi Arabia, which would help the Middle Eastern nation run sophisticated AI models. At Saudi Arabia’s global AI summit, attendees discussed accessing NVIDIA’s H200 chips, initially used in OpenAI's GPT-4o, a multimodal transformer.
If the restrictions on selling advanced semiconductors are lifted, NVIDIA’s revenues will surge due to the heightened demand in Saudi Arabia. NVIDIA is making the most of the rise in global semiconductor sales, which hit $51.3 billion in July, up 18.7% year over year, per the Semiconductor Industry Association.
Huang Issues Promising Guidance for Blackwell
At a technology conference hosted by The Goldman Sachs Group, Inc. GS, on Wednesday, Huang said that NVIDIA has ramped up manufacturing of the much-awaited next-generation Blackwell chips. Shipping of these high-end chips will begin in significant numbers in the fourth quarter to cater to high demand.
Alphabet Inc. GOOGL, Microsoft Corporation MSFT and Meta Platforms, Inc. META have ordered the Blackwell chips in large numbers worth billions of dollars, while Amazon.com, Inc. AMZN is contemplating moving from Hopper to Blackwell as it has more AI throughput.
The new Blackwell’s NVLink will offer high-speed communication, while its graphic processing unit (GPU) will have more power. The NVIDIA CEO also confirmed they will move to other fabrications if required and reduce dependency on Taiwan Semiconductor Manufacturing Company Limited TSM to develop the chip designs (read more: Which Chip Stock to Buy in a Murky September? NVDA or TSM).
More NVIDIA Tailwinds: Supremacy in the GPU Space
Huang recently said that a huge chunk of data would be transferred from the central processing units to GPUs, a blessing for NVIDIA since the chip giant has more than 80% share in the GPU market, which is estimated to reach $1,414.39 billion by 2034 from $75.77 billion in 2024, at a CAGR of 13.8%, according to Precedence Research.
Image Source: Bloomberg Intelligence - 2024 Data as of June
NVIDIA’s dominance in the GPU market propelled the company’s revenues from the data center GPU business to $26.2 billion in the second quarter, up 154% year over year. In comparison, NVIDIA’s arch-rival Advanced Micro Devices, Inc.’s AMD revenues from the data center business grew 115% to only $2.8 billion.
NVIDIA’s GPUs enjoy a wide competitive moat because of the dependency that developers have on the CUDA software platform. Unlike CUDA, AMD’s software platform, ROCm isn’t considered to be very efficient (read more: The Best Chip Stock Post NVIDIA Earnings: NVDA, AMD or INTC?).
NVIDIA is also benefitting from the growing interest in AI, as GPUs are an integral part of the computer server infrastructure needed to train large language models and operate AI interfaces. NVIDIA’s H100 graphic cards are the most sought-after in the AI chip market. The AI industry is projected to grow from $214.6 billion in 2024 to $1,339.1 billion in 2030, according to Markets and Markets.
NVIDIA Stock – Has a Strong Price Upside
The likely ease in restrictions on the sale of chips to Saudi Arabia, Blackwell production heating up, and the clear lead in the GPU space would boost NVIDIA’s shares in the near future.
Notable brokers, hence, have jacked up the average short-term price target of NVDA by 38.1% from the stock’s last closing price of $108.10. The highest price target set by the analysts is $200, signifying an upside of 85%.
Image Source: Zacks Investment Research
Additionally, so far this year, NVIDIA’s shares have traded above the 200-day moving average, which is indicative of a prolonged uptrend.
Image Source: Zacks Investment Research
NVIDIA stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
Meta Platforms, Inc. (META) : Free Stock Analysis Report