When will Nvidia (NVDA +2.33%) run out of steam? The stock has skyrocketed more than 11x over the last two years. That's the kind of momentum that longtime investors would tell you can't continue indefinitely.
But anyone who thought Nvidia had finally faced its day of reckoning earlier this year has already been proven wrong: The stock fell more than 20% below its high two times in the second half of 2024, only to bounce back.
Even better days might be ahead. Here's why one top Wall Street analyst thinks investing in Nvidia stock now is a "generational opportunity."
NASDAQ: NVDA
Key Data Points
Accelerating AI
If you guessed this huge opportunity for Nvidia relates to artificial intelligence (AI), you're right. Technically, Bank of America analysts led by Vivek Arya used the phrase "generational opportunity" to describe what lies ahead for Nvidia in AI accelerators -- chips used to speed up the performance of AI tasks. However, this massive opportunity for Nvidia also presents an equally great opportunity for investors.
Nvidia's graphics processing units (GPUs) are the gold standard in accelerating AI applications. The company isn't likely to relinquish its lead anytime soon, especially with its super-powerful Blackwell chips on the way.
In 2023, the AI accelerator market totaled around $45 billion. Arya and the other BofA analysts project this market will explode to $280 billion by 2027. They think it could top $400 billion in subsequent years.
What will be the key driver of this phenomenal growth? Large language models (LLMs). Bank of America analysts wrote to investors last week: "We continue to see the pace of new model development increase. LLMs in particular are being developed for both larger size and better reasoning capabilities, which both require greater training intensity."
Bigger than Apple?
Unsurprisingly, Bank of America upped its price target for Nvidia. Its analysts now expect the GPU maker's share price to reach $190 within the next 12 months. That translates to a market cap of roughly $4.7 trillion. The biggest publicly traded company right now is Apple (AAPL +1.50%), which has a market cap of around $3.6 trillion.
Nvidia could compete neck-and-neck with Apple on another front, based on BofA's projections. They think Nvidia could rake in $272 billion of AI-related revenue by 2030. Apple recorded iPhone net sales of $200.6 billion in 2023, down 2% year over year.
There's no guarantee that Nvidia will be bigger than Apple, though. Apple has its own potential AI catalyst with the launch of its Apple Intelligence generative AI functionality. Some analysts believe these new capabilities could ignite an iPhone upgrade supercycle.
A generational opportunity to buy Nvidia?
Could the Bank of America analysts be wrong about Nvidia? Perhaps. There are several things that could go wrong for the chipmaker.
For example, generative AI and LLMs could hit a wall. Some AI experts believe the lack of new training data for AI models could become a serious issue. Although synthetic data created by AI could provide an answer to this problem, it's uncertain if this approach will work well.
Nvidia also faces increasing competition. And it's not just from chipmakers such as Advanced Micro Devices. Cloud services giants Amazon, Microsoft, and Google parent Alphabet have their own AI chips as well.
A major economic downturn could prevent BofA's predictions about Nvidia from materializing as quickly as its analysts expect. Even large customers could curtail spending on AI if they face significant financial challenges.
However, I suspect the chances that Bank of America analysts are right about the generational opportunity for Nvidia are greater than the chance that they're wrong. If so, it could be a long time before this stock truly runs out of steam.
