Where will Nvidia stock be in 1 year? | The motley fool

Nvidia (NVDA 4.89%) the stock has been a fantastic performer in the short and long term. Shares of the artificial intelligence (AI) technology giant have gained 121% so far this year through May 31. Over the past decade, the stock has returned 24,140%, which has transformed a $1,000 investment into more than $242,000. These gains have also depressed the market S&P 500 in these periods the index returned 11.3% and 230% respectively.

At some point, Nvidia stock won’t be able to continue its current phenomenal performance. However, the company — and by extension, its stock — still has strong upside potential in at least the near term. Below are my predictions for the company and its stock one year from now, or in late May/early June 2025.

1. Jensen Huang will still be CEO

Nvidia co-founder and CEO Jensen Huang turned 61 earlier this year, according to public records, so he’s certainly young enough to continue in his role for some time, assuming he stays healthy. It’s clear from Nvidia’s quarterly earnings calls and interviews with Huang that he’s not only brilliant, but also passionate about his work.

2. Nvidia GPUs will continue to dominate the data center AI chip market

Nvidia’s graphics processing units (GPUs) currently dominate the fast-growing market for data center chips to accelerate the processing of AI workloads, including training and inference. (Inference includes deploying or running an AI application.) Nvidia GPUs are widely estimated to have more than 90% of the data center GPU AI chip market and at least 80% of the overall data center chip market of AI data.

The growth of the AI ​​data center chips market increased greatly starting from the beginning of 2023 due to the demand for technologies that enable generative AI. This is the technology that powers the ChatGPT chatbot.

Nvidia will still very much control this market within a year, in my opinion. Advanced Micro Devices (AMD) and Intelboth of which are relatively new entrants to the data center GPU AI chip market, may take a small share of the market, but they won’t make a significant dent in Nvidia’s dominance.

Why? Because Nvidia has a high moat around this business. It stems from the company’s big start in this market, which has led to “over 4.7 million developers worldwide using CUDA and our other software tools to help deploy our technology in our target markets,” it said. Nvidia in its fiscal 2024 annual report published in February. Using CUDA, developers program Nvidia’s GPUs to be able to greatly accelerate general computing and AI.

3. And Nvidia’s stock price a year from now?

First, a caveat: Macroeconomic factors can affect any company’s stock price. These include economic slowdowns or recessions, which can cause the stock market to enter a bear market. Even just the expectation of a recession can sink the stock market if the expectation is widespread.

That said, I think Nvidia stock could reach at least $1,700 per share within a year, assuming the US economy remains at least in a minimal growth mode and the stock market remains at least slightly bullish. That price target would represent a gain of at least 55% from the stock’s Friday closing price of $1,096.33.

As background to my calculation: for many years, Wall Street analysts have been doing this continuously AND significantly underestimated Nvidia’s earnings growth potential. As a group, they are improving, but their earnings estimates are still very low. For Nvidia’s most recent four quarters, the consensus estimate of analysts’ earnings turned out to be very low at an average of over 17%. The exact percentages starting from the most recent quarter were 9.5%, 11.4%, 19.3% and 29.2%.

Given this dynamic, it makes sense for me to raise Wall Street’s earnings estimates to develop a price target. Of course, we do not know how many analysts will be absent in the future. So the best we can do is assume that they will be down about 17% over the next year, just as they were over the past year.

Nvidia stock’s current price-to-earnings (P/E) ratio is 40.6. I assumed this ratio will be the same in a year. But I raised by 17% Wall Street’s estimated earnings per share (EPS) for the next fiscal year of $35.66 to get $41.72. Multiplying 40.6 by $41.72 gives $1,694. That’s pretty close to $1,700 to raise.

This calculation should be considered approximate, or back. A lot can happen in a year with Nvidia, the competitive environment and the macroeconomic environment. So don’t put too much stock in my (or anyone else’s) 1-year price target. What I feel very confident about, however, is that Nvidia stock will outperform the market over the next year.