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Analysts at Bank of America raised their price target for Nvidia stock this week to $190 per share.
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They see the AI market growing to $400 billion, giving Nvidia a “generational opportunity.”
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They point to Nvidia’s strong competitive edge, helped by its business partnerships.
Nvidia shares have been on a tear all year, but investors can brace for more gains ahead, Bank of America analysts say.
In a note on Thursday, analysts raised their price target on the stock from $165 to $190. That implies a 38% increase from the price of about $138 per share Friday afternoon.
The analysts point to exponential growth in the AI market in the coming years, which they say will give Nvidia a “generational opportunity” as the chip titan continues to strengthen its lead in the market.
The analysts see the market for AI accelerators growing to $280 billion by 2027, and to more than $400 billion over time – a massive increase from $45 billion in 2023.
As AI models continue to grow rapidly — with developers like OpenAI, Google and Meta launching new major language models several times a year — the need for computing will only increase, the analysts predict.
Each new large LLM generation, especially those developed for larger size and better reasoning skills, will require greater training intensity, they add.
“We continue to see the pace of new model development increase. LLMs in particular are being developed for both larger size and better reasoning ability, both of which require greater training intensity,” the analysts said.
They also point to Nvidia’s strong partnerships with enterprise customers like Accenture, ServiceNow, Oracle and others, demonstrating the growing presence of AI at large companies and Nvidia’s role as a partner of choice.
“NVDA’s operations span multiple verticals (e.g. Accenture, ServiceNow, Microsoft), and offerings such as AI Foundry, AI Hubs and NIMs are key levers for its leadership in AI, not only on the hardware side, but also on the of systems and ecosystems,” the analysts said.
The analysts also said Nvidia’s financials are well poised for future earnings. Given the free cash flow generated at margins of 45%-50%, which is nearly double that of other Magnificent 7 stocks, Nvidia will be able to generate $200 billion in free cash flow over the next two years, they wrote.
Nvidia shares have skyrocketed this year, up 187%, as AI continues to grow after a year short sale during the summer. The sector has since recovered, with chip stocks like Nvidia and TSMC trading at or near record highs in recent weeks.
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