The advent of artificial intelligence (AI) has caused a paradigm shift in the direction of technology since early last year, and arguably, no company has benefited more than Nvidia (NVDA -0.46%). The company's graphics processing units (GPUs) are the gold standard when it comes to AI, but some fear the competition is ramping up.
One Wall Street analyst thinks investors are missing the forest for the trees.
Another leg up
Goldman Sachs analyst Toshiya Hari retained Nvidia on the company's "Conviction List," maintaining his buy rating on the stock and raising his price target to $1,100. That represents potential gains for investors of 22% over the coming year, compared to the stock's closing price on Wednesday. The analyst posits that Nvidia's processors will "remain the de facto industry standard for the foreseeable future."
The analyst has a point. Competitors have been trying to take the crown from Nvidia for years, yet its technology is unsurpassed for processing AI. Alphabet unveiled Google's first Tensor Processing Unit (TPU) AI chip in 2015, and Amazon debuted its Inferentia AI chip in 2018.
Despite those years of competition, Nvidia remains unchallenged. Why? The company spent 20% of its fiscal 2024 revenue on research and development, and its technology is light years ahead of its rivals.
Hari's channel checks suggest "continued robust AI server demand," which will fuel Nvidia's future profitability. As a result, he boosted the company's non-GAAP earnings per share (EPS) estimate for fiscal 2025, 2026, and 2027 by 8%, on average. Furthermore, the analyst believes his peers have set their profit targets too low, which will drive "another leg up" for Nvidia stock.
It's good to see one of Wall Street's finest focus on the long term, as that's the real edge we have as investors. Nvidia stock is currently selling for 36 times forward earnings. While some might feel that's a bit pricey, the company's triple-digit sales growth over the past year makes it well worth the slight premium.
