Key Points
The company posted strong revenue and earnings growth in the second quarter.
AI data centers are already a huge revenue source for the chipmaker.
It would be an understatement to say that Wall Street is bullish on Nvidia (NASDAQ: NVDA).
The artificial intelligence (AI) chip manufacturer announced its second-quarter results on Aug. 26, and they were stunning. Revenue of $96.2 billion was more than double that of the same quarter a year ago. Diluted earnings per share of $2.46 rose 128% from last year and were $0.12 higher than the average analyst estimate.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
So I just checked the latest data on price targets, which are Wall Street analysts' official predictions of where the stock will be in 12 to 18 months, based on historical and projected earnings. Suffice it to say that, on average, analysts see Nvidia's stock rising, and fast.
Image source: Getty Images.
The average price target for Nvidia among Wall Street analysts is $327, which is about 42% above the current price of $230. Such an increase in the share price would not be unprecedented for this stock, of course. It's up 34% over the past 52 weeks and more than 900% over the past five years. That rapid rise has brought the company's market cap to a whopping $5.56 trillion, making it the largest publicly traded company in the world by market cap.
Analysts' price targets for Nvidia vary widely, ranging from $220 (Argus Research clearly believes the shares will lose value) to $515, the target set by Raymond James. Most analysts put the stock's forward price somewhere between $300 and $350.
The vast majority of analysts recommend a buy or strong buy
Of 60 analysts, 48 currently have a buy recommendation on the stock, and another nine have a strong buy. Deutsche Bank recommends a hold.
In recent days -- soon after the company's Q2 results came out -- J.P. Morgan analyst Harlan Sur raised his target for the stock from $280 to $320. If the average price target proves correct, the chipmaker's market cap would soar to nearly $8 trillion.
Can it go that high? Well, Nvidia's management sees revenue rising to $108 billion in the third quarter, and expects full-year revenue to soar 70% over last year, which is much higher than the 44% growth consensus projection from analysts.
And one last data point: Revenue from data centers came in at $89 million for the second quarter, up 117% from a year ago. That suggests the massive AI infrastructure build-out is already generating revenue and is not just a hopeful promise for the future. That might reassure investors that this stock has strong upside potential.
JPMorgan Chase is an advertising partner of Motley Fool Money. Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and Nvidia. The Motley Fool has a disclosure policy.