AI chip giant Nvidia’s stock price rose 4.14% on the 21st, closing at $143.71, surpassing a market value of $3.5 trillion for the first time in history, making it the second company to reach this milestone, following Apple with a market value of about $3.6 trillion. What factors are driving Nvidia’s strong performance?
(Table of Contents)
– Nvidia’s market value surpasses $3.5 trillion
– TSMC: Nvidia orders filled until next year
– Bank of America raises Nvidia’s target price to $190
Benefiting from the rapid growth of the AI industry, Taiwan Semiconductor Manufacturing Company (TSMC), the leading semiconductor manufacturer, reported impressive financial performance in the third quarter, with Chairman Mark Liu expressing confidence in the next five years and emphasizing the real demand for AI, inspiring a historical high in stock prices. At the same time, TSMC’s important customer, Nvidia, also benefited from this positive news, with its stock price rising and reaching a new high on the 21st.
According to Google Finance data, Nvidia’s stock price rose against the trend on the 21st, contrasting with the decline in the S&P 500 and Dow Jones Industrial Average, surging by 4.14% and closing at $143.71, surpassing a market value of $3.5 trillion for the first time, reaching $3.5252 trillion, making it the second company in history to reach this milestone, closely following Apple with a market value of $3.5955 trillion, with a difference of only $70.3 billion in market value.
The strong performance of Nvidia’s stock price may be related to the information revealed during TSMC’s investor conference last week. TSMC stated that Nvidia’s orders are already filled until 2025, and with the new product GB200 expected to be shipped in large quantities before the end of this year, the revenue and profits are expected to grow significantly by 2025. After this major positive news was announced, it immediately boosted the stock prices of both TSMC and Nvidia, as well as related supply chain stocks.
Morgan Stanley analyst Joseph Chang pointed out that with the optimistic sales prospects of the GB200 chip, the revenue, profits, and stock prices of the AI supply chain are expected to reach new highs, becoming a group of stocks to watch out for in the future. This also reflects the market’s optimistic attitude towards the demand for Nvidia’s new generation AI processor, Blackwell.
Another factor driving the rise in Nvidia’s stock price may be the upcoming release of Tesla’s earnings report this Wednesday. Market expectations are driving up Nvidia’s stock price in advance, as Tesla relies on Nvidia’s GPUs for AI computing to train its driver-assist system and develop humanoid robots. If the future outlook revealed in the financial report is similar to TSMC’s expectations, it may further boost Nvidia’s stock performance.
In addition, analysts have raised Nvidia’s target price, which is another reason for the stock price increase. Susquehanna analyst Christopher Rolland maintained a positive rating on Nvidia on Monday and reiterated a target price of $160. He pointed out:
Bank of America also raised its revenue and earnings per share (EPS) forecasts for Nvidia in the next three years and increased the target price by about 15% to $190, reaffirming a “buy” rating. Based on the latest closing price of $143.71, Nvidia has a potential upside of as much as 32.2%.
The key reasons for Bank of America’s upward adjustment of Nvidia’s target price include:
– Consolidation of Nvidia’s leadership position in the AI field: Nvidia’s market share in the AI market is 80% to 85%, and the potential market size (TAM) in the AI industry exceeds $400 billion, indicating tremendous growth opportunities.
– Strong demand for AI: Strong demand for AI and large language models, coupled with improved supply visibility for CoWoS and HBM, will drive future revenue and EPS growth.
– High free cash flow: Nvidia’s free cash flow profit margin is over 45% to 50%, approximately twice the average level of other major US tech companies.
– Attractive valuation: Nvidia’s price-to-earnings growth ratio (PEG) is 0.6, much lower than the average of 1.9 for the seven major US stocks.
– Future market potential: Bank of America predicts that the AI accelerator market will grow to $280 billion by 2027 and exceed $400 billion in the future.
With the official shipment of Blackwell and the potential improvement in Nvidia’s gross margin if the market accepts it smoothly, Nvidia’s market value is expected to surpass Apple’s once again.