The paradigm shift represented by artificial intelligence (AI) is having a pronounced effect on the tech landscape, and nowhere is that more apparent than Nvidia (NASDAQ: NVDA). The company provides the chips with the computational horsepower to power AI, driving its financial results and stock price into the stratosphere. Nvidia stock is up more than 200% over the past year, resulting in a 10-for-1 stock split, which was completed just last month.
Despite the stock's impressive run, Wall Street is reviewing its pricing models, and one analyst believes Nvidia still has plenty of upside ahead.
Fueled by Blackwell
UBS analyst Timothy Arcuri reiterated his buy rating on Nvidia stock and increased his price to $150. That represents potential upside for investors of 19%, compared to the stock's closing price on Friday. The analyst believes that Nvidia's recent focus on rack-scale servers is underappreciated and could spark additional gains for the chipmaker.
In March, Nvidia released details for its GB200 NVL72 system, powered by its GB200 Grace Blackwell Superchip. The processor contains "two high-performance NVIDIA Blackwell Tensor Core GPUs [graphics processing units] and the NVIDIA Grace CPU with the NVLink-Chip-to-Chip (C2C) interface." The platforms are packed with either 36 or 72 GB200 GPUs, delivering up to 1.8 terabytes of throughput per GPU.
Arcuri's channel checks suggest that demand for the Blackwell servers is "exceedingly robust," noting that demand was "materially larger" than when he checked just two months ago. This could help push Nvidia's earnings per share (EPS) to $5 in 2025. For context, the company generated split-adjusted EPS of $1.19 for fiscal 2024 (ended Jan. 28), so this represents a potential increase in profits of 320%.
I think the analyst hit the nail on the head. Every time Nvidia expands its domain, the company also increases its total addressable market and potential for greater profitability.
Nvidia's stock is currently selling for 75 times forward earnings. However, if the analyst's calculations are correct, the stock is currently trading for 24 times forward earnings, a bargain given the opportunity ahead.
