No matter how you slice it, the adoption of artificial intelligence (AI) has played a pivotal role in driving the stock market in recent years, but investor confidence appears to be waning. Despite evidence to the contrary, fears that AI adoption will hit a wall and concerns of a bubble have weighed on AI stocks.
A perfect example is AI chipmaker Nvidia (NVDA 1.53%). The company's graphics processing units (GPUs) are widely recognized as the gold standard for running AI in data centers, and its revenue and profits continue to climb. However, in recent months, the stock price has languished, falling 13%.
Late last week, one Wall Street analyst made a bold call, suggesting Nvidia's stock price will more than double to $360 over the coming 12 months. Let's look at the company's recent results, examine this bullish call, and see what it would take to drive Nvidia's stock to new heights.
Image source: Getty Images.
The adoption of AI continues
There's no denying Nvidia's blistering results over the past decade: Revenue and net income have soared 5,120% and 17,380%, respectively, fueling stock price gains of 22,490% (as of this writing). The unrelenting demand that began in early 2023 has been driven by the ongoing adoption of AI, as evidenced by the company's recent results.
In its fiscal 2026 fourth quarter (ended Jan. 25), Nvidia's results accelerated higher. Record revenue of $68 billion climbed 73% year over year and 20% sequentially, while earnings per share (EPS) of $1.76 jumped 98%.
The data center segment -- which includes chips used for AI and cloud computing -- was the headliner, with sales of $62 billion surging 75%, underscoring the ongoing demand for AI.
Nvidia's forecast suggests the company's robust growth will continue. Management's first-quarter outlook calls for revenue of $78 billion, which would represent 77% year-over-year growth at the midpoint of its guidance, up from 73% growth in Q4.
Nvidia continues to supply the lion's share of data center GPUs, with a dominant 92% market share, according to IoT Analytics. As the market leader, the company is well-positioned to ride the adoption of AI higher.
NASDAQ: NVDA
Key Data Points
The path to $360
Nvidia's current stock price is about $178 (as of this writing), so it would need to double to reach $360. Yet even as the stock has been treading water, its profits have continued to soar. Right now, despite its relentless growth, the stock trades for less than 22 times forward earnings -- even though Wall Street expects its revenue to grow 70% over the coming year. Assuming analysts' growth targets are accurate, and the company maintains its roughly 55% profit margin, Nvidia will generate net income of $202 billion over the coming year, an increase of 68%.
It's important to remember that Nvidia has a history of issuing conservative guidance and Wall Street has a track record of underestimating the chipmaker, so its results will likely be higher. Moreover, given expectations for 70% growth next year, it will only take a slight rerating of Nvidia's multiple to take the stock to the next level.
Don't take my word for it. Tigress Financial analyst Ivan Feinseth just reiterated his strong buy rating on Nvidia stock and raised his 12-month price target to $360, which is 102% above its current level. The analyst believes the chipmaker will generate revenue of $406 billion and operating profit of $201 billion over the coming year. He goes on to suggest that if the company achieves those metrics and is assigned a multiple of 30, Nvidia's stock price will reach $360.
Talk of an AI bubble and fears of a slowdown have shaken some fair-weather shareholders out of Nvidia stock. However, nine out of 10 retail investors plan to maintain or even increase their AI holdings, according to recent research from The Motley Fool.
The current disconnect allows seasoned investors to buy the stock at a relative discount. As I pointed out above, Nvidia is currently trading at just 22 times forward earnings, even though it's expected to increase revenue by 70% to $367 billion over the next 12 months.
Even if the stock doesn't double by this time next year, it will likely be much higher than it is today. That's why Nvidia stock is a buy.
