This Red-Hot Stock Still Has 50% Upside, According to 1 Wall Street Analyst

While I generally take Wall Street's never-ending stream of upgrades and downgrades with a grain of salt, I think this one makes a compelling argument.

TD Cowen analyst Matthew Ramsay announced the firm's "Best Idea" for 2024 and it should come as no surprise that it was Nvidia (NVDA 1.75%). The firm issued an outperform (buy) rating on the shares and a $700 price target, which represents potential gains of 50% upside compared to Monday's closing price -- even after a blistering rise of 219% so far this year, fueled by soaring adoption of artificial intelligence (AI).

Investors would be forgiven for asking, "Does Nvidia really have 50% potential upside from here?"

To be fair, I think the analyst is being a bit too conservative. Here's why:

The catalyst that drove Nvidia stock higher this year was back-to-back quarters of triple-digit, year-over-year growth.The company's graphics processing units (GPUs) and accompanying software provide the computational horsepower needed for AI applications.

That's not to say there isn't competition, but as Ramsay notes, the market is "more than sufficiently large" to accommodate multiple competitors. I think he's onto something.

Morgan Stanley and Goldman Sachs estimate the market opportunity at $6 trillion and $7 trillion, respectively, by 2030. Cathie Wood's Ark Investment Management believes the AI software opportunity alone tops out at $14 trillion by 2030. Whatever the case, the market is big enough to handle multiple players.

Furthermore, Nvidia has successfully adapted the humble GPU to a wide variety of computationally demanding tasks, including machine learning (a branch of AI) and data centers, among others. Its processors are the gold standard for both of these applications, and some estimates place Nvidia's market share as high as 95% in the data center market and 95% in the machine learning market. Even if Nvidia only captures a fraction of the generative AI market, the rewards for the company and its investors could be substantial.

Let's not forget the gaming market, which has just shown the first green shoots of growth after a historic downturn.

CEO Jensen Huang has a long history of skating to where the puck will be and positioning Nvidia for the next big thing. Given his track record and the multiple opportunities, I think Nvidia could fly much higher than Wall Street believes.