With excitement over artificial intelligence reaching a fever pitch, Nvidia (NASDAQ:NVDA) again added to its mercurial performance, rising 2.5% on Friday afternoon. Undergirding sentiment recently was UBS analyst Timothy Arcuri, who boosted the price target of NVDA stock to $1,100. Previously, his expectation sat at $800.
In a research note, Arcuri remarked that Nvidia “sits on the cusp of an entirely new wave of demand from global enterprises and Sovereigns.” This comment centers on the technology giant’s many announcements it made during its recent developer conference, particularly the launch of its new Blackwell chips. Nvidia CEO Jensen Huang mentioned the United Arab Emirates, Saudi Arabia, Sweden, Japan, Korea and Malaysia as key government customers.
Noting the potential for Nvidia to create its own market, Arcuri wrote the following:
New pre-packaged and pre-trained modular AI models announced with together with Blackwell should also accelerate the distribution flywheel for [Nvidia’s] AI solutions to ride alongside enterprise software. The entire framework creates a central distribution structure similar to an app store and given the vast array of companies to potentially license NVDA’s AI Enterprise software ($4500/GPU/yr), monetization can add up quickly.
In addition to the countries mentioned above, significant projects in other nations like Singapore, Switzerland and France could help boost enterprise cloud demand, thus driving NVDA stock higher.
Not Everyone Is Sold on NVDA Stock
So far this year, NVDA stock has nearly doubled in value. In the trailing 52 weeks, it’s up around 253%, a simply remarkable performance. However, that also raises valuation concerns. On paper, shares trade at 79.17x trailing-year earnings and 38.71x trailing-year revenue. Some investors may view such premiums to be too rich.
In fairness, though, Arcuri’s point is that ultimately, it’s difficult to pinpoint a benchmark premium for NVDA stock. As other experts have pointed out, with the scorching rise of AI and related innovations such as machine learning, Nvidia might not be richly priced. Instead, it could be trading at a reasonable valuation given the heightened demand profile.
Still, not everyone is convinced about NVDA stock. In February this year, New York University’s Aswath Damodaran – who’s known as the “Dean of Valuation” – stated that investors have used the generative AI hype train to justify overly ambitious multiples. Along with Nvidia, Damodaran called out the rising price of Microsoft (NASDAQ:MSFT) as problematic:
I think the laziness with which people attach premiums to companies just because they see the word ‘AI’ — and you see that partially with Microsoft as well — is, I think, terrifying because at some point in time, reality is going to play out and it’s not going to match those expectations.
Still, with NVDA stock up 49% since the close of Feb. 1, the bearish case is more difficult to swallow.
Why It Matters
At the moment, analyst rate NVDA stock a consensus strong buy. This assessment breaks down as 39 buys and two holds. Overall, the average price target now stands at $975.73, implying almost 4% upside. The most optimistic target calls for $1,400.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
