Nvidia’s (NASDAQ:NVDA) share price has regained its upward momentum recently, hitting new all-time highs. As a result, many investors are eyeing up $200 as the next big price target.
One brokerage firm believes that the tech stock can climb much higher than this, however. It sees $250 on the horizon – roughly 60% higher than the share price today.
Loop Capital has gone big
The brokerage firm I’m referring to is Loop Capital. Recently, it raised its price target for Nvidia from $175 to $250 (which would equate to a $6trn market cap).
In a research note posted on 25 June, Loop analyst Ananda Baruah – who has a Buy rating on the stock – said that he expects spending on artificial intelligence (AI) to increase significantly in the years ahead (to nearly $2trn by 2028). And he sees Nvidia as a major beneficiary.
“Our work suggests we are entering the next ‘Golden Wave’ of Gen AI adoption and Nvidia is at the front-end of another material leg of stronger-than-anticipated demand,” wrote Baruah. “We remind folks that Nvidia remains essentially a monopoly for critical tech, and that it has pricing (and margin) power,” he added.
Crunching the numbers
Is this lofty price target (the highest target among the brokerage community at present) a genuine possibility in the near term? I’m not so sure. While I can see Nvidia hitting $200 in the next 12 months, I think $250 could be a stretch.
That said, if I take a three-to-five year view, I can definitely see the potential for $250. In my view, spending on AI is likely to remain high in the years ahead, given the technology’s ability to increase productivity and cut costs. And as Loop Capital points out, Nvidia has a strong market position in the critical technology needed for AI.
Crunching the numbers, this financial year (ending 31 January 2026), Nvidia’s earnings per share are projected to grow 46% year on year to $4.31. Let’s say that the company can generate 25% EPS growth for the following three financial years. That would take EPS to about $8.42 by FY2029. Stick a price-to-earnings (P/E) ratio of 30 on that projected EPS figure and we have a price target of approximately $253.
No guarantees…
Of course, my earnings projections for Nvidia could turn out to be way too optimistic. There are plenty of factors that could lead to slower growth.
Big Tech companies like Microsoft and Meta could decide that AI expenditures aren’t generating a high enough return on capital and rein in their spending on Nvidia’s GPUs. Alternatively, they could turn to AI chips developed by other companies such as AMD and Amazon.
I could also be wrong when it comes to the valuation. Recently, Nvidia’s P/E ratio has been coming down. In a few years, the company may not be able to command a P/E ratio in the 30s.
I do believe there’s plenty more growth to come from Nvidia in the long run, however. I reckon this company is going to get bigger and bigger.
I remain convinced that the stock is worth considering on pullbacks when there’s a little less hype and excitement surrounding it.
