Nvidia's longer-term growth prospects justify price target raise - Stifel

Investing.com -- Nvidia's (NASDAQ:NVDA) longer-term growth prospects and profitability metrics justify have led analysts at Stifel to raise their price target for shares in the artificial intelligence chipmaker.

In a note to clients on Tuesday, the analysts said they are lifting their price target for Nvidia's shares to $165 from $114, which was adjusted to account for Nvidia's recent decision to carry out a ten-for-one stock split.

The increase is based on Stifel's new projections for Nvidia's stock to trade at roughly 40 times expected fiscal 2027 earnings per share of $4.10, the analysts said.

"We expect the majority of near-to-medium term opportunities will come from high performance computing, hyperscale and cloud data center, and enterprise and edge computing," they argued. "While we continue to view Nvidia’s exposure to Gaming, Automotive and Professional Visualization favorably, the shift from general purpose compute to accelerated compute represents the company’s most significant revenue and profitability growth opportunity over the next several years."

But they noted several risks to the updated price target, including a "potential digestion period following several quarters of significant investment", unforeseen tightening of U.S. trade restrictions on technology shipped to China and "general macro[economic] events."

Nvidia's stock price rose more than 3% to $135.58 on Tuesday, pushing its market capitalization above software giant Microsoft (NASDAQ:MSFT) to become the world's most valuable company.

California-based Nvidia, which designs processors that are seen as critical components of powerful AI models like OpenAI's ChatGPT, added a little over $110 billion to its market cap -- roughly the equivalent of the entire value of Lockheed Martin (NYSE:LMT).

Once known as a manufacturer of chips optimized for the gaming community, Nvidia has evolved over the last two years into one of the figureheads of soaring enthusiasm around the capabilities of AI. Chief Executive Jensen Huang has said Nvidia is at the heart of a new "industrial revolution" that could fundamentally alter the global economy.

Its massive share increase -- including about a 170% skyrocketing so far this year -- has lifted broader stock markets. A third of the 14% jump in the S&P 500 in 2024 is solely due to Nvidia's rise.