The "Magnificent Seven" is a basket of mega-cap companies collectively worth more than $10 trillion. They account for more than one-quarter of the broad-based S&P 500 and nearly one-half of the technology-heavy Nasdaq Composite when measured by weighted exposure.
The Magnificent Seven are listed alphabetically below along with their median 12-month price target set by Wall Street analysts, as well as the implied upside from the current price.
- Alphabet: $153 per share (16% upside).
- Amazon: $175 per share (19% upside).
- Apple: $200 per share (5% upside).
- Meta Platforms: $380 per share (17% upside).
- Microsoft: $413 per share (10% upside).
- Nvidia (NVDA -0.41%): $650 per share (39% upside).
- Tesla: $256 per share (7% upside).
Wall Street sees upside in all seven stocks, but none more so than Nvidia. Despite the stock climbing 220% year to date, analysts see another 39% upside for shareholders over the next year or so.
Read on to learn more about this magnificent company.
Nvidia GPUs are the gold standard in accelerated computing
Nvidia specializes in accelerated computing. The company is often described as a chipmaker, but it actually provides a variety of hardware, software, and services to customers across four end markets: gaming, professional visualization, data center, and automotive.
Nvidia initially focused on computer graphics. Its invention of the graphics processing unit (GPU) in 1999 brought groundbreaking visual effects to video games and films, and the company still holds more than 90% market share in workstation graphics processors. But Nvidia turned its attention to the data center in 2006 when it introduced CUDA, a programming model that allows its GPUs to function as general-purpose processors.
Since then, Nvidia GPUs have become the gold standard in accelerating complex data center workloads like analytics, scientific computing, and artificial intelligence (AI). In fact, Forrester Research says Nvidia GPUs are synonymous with AI infrastructure, and the company holds an astonishing 80% to 95% market share in machine learning processors, according to analysts.
Nvidia evolved into a data center computing company
Nvidia has a visionary leader in CEO Jensen Huang. He anticipated the importance of the data center before the market really materialized, and he prepared his company accordingly. "Over a decade ago, Jensen Huang understood where the market was going to go, so [Nvidia] invested billions of dollars in not only silicon, but software," Baird analyst Ted Mortonson told Business Insider earlier this year.
Nvidia has indeed reinforced its role in the data center (and cemented its leadership in AI and graphics) by branching into high-performance networking equipment, subscription software, and cloud services. One of its newest innovations, DGX Cloud, is especially noteworthy because it brings together and democratizes the entire Nvidia AI platform.
Specifically, DGX Cloud lets businesses rent the supercomputing infrastructure, software, and pretrained models they need to build and deploy AI applications, rather than buying costly hardware for private data centers. DGX Cloud includes development frameworks that address specific use cases, such as product recommender systems for retail, intelligent avatars for customer service, and route optimization software for logistics. It also supports the development of generative AI applications for text, images, video, and even biological molecules.
Argus analyst Jim Kelleher sees DGX Cloud as a particularly momentous development. He recently wrote the following in a note to clients: "Nvidia stands out, in our view, not only because it participates in so many parts of the dynamic AI economy, but because it has synthesized its offerings into a first-of-its-kind AI-as-a-service delivered through the cloud."
Nvidia has hardly tapped its $1 trillion addressable market
Nvidia reported phenomenal financial results in the third quarter, beating expectations on the top and bottom lines. Revenue rose 206% to $18.1 billion, due primarily to record sales in the data center segment, as detailed below:
- Data center sales increased 279% to $14.5 billion.
- Gaming sales increased 81% to $2.9 billion.
- Professional visualization sales increased 108% to $416 million.
- Automotive sales increased 4% to $261 million.
Additionally, non-GAAP (adjusted) net income soared 588% to $10 billion as high-margin software and services accounted for a larger portion of total sales. Yet, Nvidia has hardly tapped its $1 trillion addressable market and AI spend is forecast to grow at 37% annually through 2030, according to Grand View Research. In that context, the company is well-positioned to maintain its momentum.
Indeed, Morningstar analyst Brian Colello expects Nvidia to grow revenue at 22% annually over the next decade, implying that sales will increase 630% by 2033. In that context, its current valuation of 25.9 times sales looks rather reasonable, despite being a premium to its three-year average of 23.4 times sales. Patient investors who can handle volatility should consider buying a small position in Nvidia stock today.
