Nvidia Stock Rises Over 20% in Five Weeks: Reasons Behind Wall Street's Buy Rating

In recent weeks, Nvidia's stock has witnessed an impressive increase of over 20%. This remarkable rise has sparked interest among investors, prompting many to wonder whether the momentum can continue. Industry analysts believe that Nvidia remains a strong buy, and here's why.

The Driving Force Behind Nvidia's Surge

The primary reason behind Nvidia's recent jump in stock price can be attributed to its new AI chip, known as Blackwell. Nvidia's CEO, Jensen Huang, recently described the demand for Blackwell as "insane" during an interview. He mentioned that many companies are eager to adopt the technology to stay competitive in the fast-evolving AI landscape.

When Nvidia unveiled Blackwell in March 2024, it was announced as a platform that would "power a new era of computing." This proclamation was not simply promotional language; it underscores the significant capabilities of the Blackwell architecture. The technology allows for running large language models with immense parameters at significantly reduced costs and energy consumption compared to its predecessor, the Hopper platform.

Major tech companies like Alphabet, Amazon, Meta Platforms, Microsoft, Oracle, and OpenAI have already expressed interest in implementing Blackwell in their operations. This strong market response highlights the growing role of AI technology in various industries.

Despite this bullish outlook, Nvidia's stock experienced some fluctuations after reports indicated potential U.S. restrictions on exporting advanced AI chips to certain Middle Eastern countries, leading to a temporary dip.

Future Outlook and Wall Street Predictions

According to analysts from LSEG, the average price target for Nvidia's stock suggests a potential increase of about 14% over the next 12 months. Some analysts are even more optimistic, forecasting that the stock could rise by as much as 55% in the same timeframe.

While enthusiasm for Nvidia remains strong, it has slightly decreased as the stock price climbs. In September, 55 out of 60 analysts viewed Nvidia favorably. Recently, a survey encompassing 38 analysts revealed that 22 still consider the stock a "buy" or "strong buy."

This confidence largely stems from Nvidia's dominant position in the AI chip market. Despite facing competition, Nvidia's GPUs are still regarded as the industry standard for training and operating AI models.

For instance, Morgan Stanley highlighted that demand for Blackwell GPUs is so high that they are sold out for the next year. Analyst Joseph Moore emphasized that indications from Nvidia's management suggest we are only at the beginning of a long-term investment cycle in AI. As a result, the firm has designated Nvidia as one of its "Top Picks."

Is Wall Street's Optimism Justified?

The question now is whether Wall Street's price target for Nvidia will be achieved in the upcoming 12 months. There are reasons to believe that the estimates may be on the conservative side.

Nvidia has not yet released any sales figures for its Blackwell chips. As the data starts to roll in and growth becomes apparent, it is likely that many analysts will revise their price targets upward.

The AI revolution is still in its early stages, according to Morgan Stanley's Moore. Given Nvidia's prominent role in this field, the company is poised to remain a significant player in the AI technology landscape for the foreseeable future.

Nvidia, Stock, AI