It’s no secret that Nvidia‘s (NASDAQ:NVDA) share price has taken the investing world by storm. The GPU-chip designer’s up more than 200% over the last 12 months. And when zooming out to the last five years, this return jumps to a staggering 2,500%!
But with so much growth already under its belt, how much higher can this US tech stock actually climb? Here are the latest forecasts from analysts.
Analyst forecasts
Right now, 64 institutional analysts are following Nvidia’s trajectory. And 58 currently rate the stock as either a Buy or Outperform. Needless to say, that’s quite a bullish following. So how do these expectations translate into financials?
For the group’s 2025 fiscal year (ending in January), revenue’s expected to continue surging with an average consensus of $129.3bn. That’s an estimated increase of 112% year-on-year. And it’s a similar story with earnings expectations. The latest predictions for Nvidia’s earnings per share stand at an average of $2.95 versus $1.30 last year – another triple-digit expected surge.
With that in mind, it’s not surprising to see why so many analysts are positive about Nvidia. But where does that put its future stock price? Here’s where opinions start to diverge.
The most optimistic forecast puts the Nivida share price at $220 over the next 12 months. That’s a +59% potential upside. However, more pessimistic predictions suggest the stock could actually fall to $75.40 per share – almost half of its current valuation. The average sits around $175, indicating a +26% gain by this time next year.
Taking a step back
The overly positive sentiment surrounding Nvidia is the global dependence on its artificial intelligence (AI) accelerator GPUs. Today, businesses looking to build out AI infrastructure don’t have a lot of choice with next-to-no alternatives to Nvidia’s products.
As such, the company’s currently benefiting from tremendous pricing power that’s become known as the ‘Nvidia tax’ by industry insiders. And since the market for AI accelerator chips is expected to continue growing at a staggering pace between now and 2030, Nvidia’s growth potential continues to look explosive.
However, that’s an issue. There’s currently very little supply to match the enormous market demand. And that’s drawn the attention of other tech giants like Advanced Micro Devices and Arista Networks, who are now developing their own Nvidia-alternative products.
So far, Nvidia remains on top. But should its rivals catch up with cheaper options, Nvidia’s gold rush could be over. And that could be quite problematic for shareholders, given the stock’s premium valuation. That’s why some analysts believe Nvidia to be overvalued.
The bottom line
As a business, Nvidia’s difficult to fault. While it does operate in a cyclical industry, management’s proven itself to be a master in capital allocation. The result has been world-leading technology and constant innovation. It’s also why Nvidia avoided having to do any layoffs when inflation started knocking.
Having said that, even the best businesses in the world can be poor investments if the wrong price is paid. That’s why I’m not tempted to buy shares at current prices.
