Zhitong
2024.07.12 01:45
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NVIDIA's rising trend is ushering in a new era! Even the "Nifty Fifty" and the "Dot-com Bubble" have not seen it before

NVIDIA's stock price surge is intense, reaching historically rare levels. Several Wall Street investment institutions are bullish on NVIDIA's stock price, expecting the total market value to double. The rise in NVIDIA's stock price is similar to the "Nifty Fifty" of the 1970s and the Internet bubble of the 1990s, where the market sees a trend of winners taking all. The Nifty Fifty index refers to the 50 large-cap stocks that were highly sought after on American exchanges in the 1960s and 1970s. NVIDIA's stock price surge heralds a new era and is expected to continue to rise

According to the Zhitong Finance and Economics APP, Jurrien Timmer, the global macro strategist at the top global asset management firm Fidelity, published an article on social media X, stating that the frenzied rise in the stock price of NVIDIA (NVDA.US) has reached extreme levels not seen since the Nifty 50 era and the internet bubble period. With NVIDIA's stock price surge "ushering in a new era," bullish bets on Wall Street are heating up. Based on the 12-month price targets given by top Wall Street institutions such as Morgan Stanley, KeyBanc, and Rosenblatt Securities, the upward momentum of NVIDIA's stock price may be far from over, and the possibility of the total market value doubling still exists.

In this newly released article, Timmer wrote: "Although some of the components of the Nifty Fifty index are no longer in existence or no longer have investment value, and have not yet reached the valuation limits of the 'Nifty Fifty' bubble period in the early 1970s and the internet bubble period in the late 1990s, this winner-takes-all stock market dynamic is beginning to reach its limits in other similar ways."

The "Nifty Fifty" index usually refers to 50 super large-cap stocks traded on the New York Stock Exchange in the 1960s and 1970s that were highly sought after by global funds. A key feature of the Nifty Fifty was strong profit growth, while valuations were much higher than other stock targets. In the 1970s, as the US economy slowed, inflation soared, and interest rates rose, the "Nifty Fifty" bubble began to burst, and some companies in the index no longer exist today.

According to the statistical data compiled by Timmer, the top three sectors of the S&P 500 index, namely Information Technology (XLK), Financials (XLF), and Healthcare (XLV), which are considered the benchmark sectors of the US stock market, account for nearly 70% of the market value of the S&P 500 index, serving as another manifestation of the "Nifty Fifty" index. The winner-takes-all stock market dynamic is beginning to reach its limits in a similar way.

Timmer also wrote that just the cumulative rebound in NVIDIA's stock price in recent years has reached historically rare levels. "Only one company in what can be called ancient times in 1929 - the Radio Corporation of America (RCA) - surpassed NVIDIA's unparalleled achievement in terms of percentage increase achieved today." According to statistics, NVIDIA's current stock price has surged by nearly 220% compared to a year ago, and a staggering 3271% compared to five years ago.

Can NVIDIA, which has surpassed the $3 trillion mark in market value, double its market capitalization?

Eric Jackson, a hedge fund manager from EMJ Capital, believes that NVIDIA's stock price will continue to soar by the end of this year. Jackson predicts that by the end of this year, the stock price will reach $250 (NVIDIA closed at $127.4 on Thursday), representing a potential upside of about 100% from current levels. If this momentum is realized, the artificial intelligence chip company's valuation will reach an astonishing $6 trillion, doubling the current market value that has surpassed the $3 trillion mark.

Jackson recently stated on a podcast, "What I mean is that from now until the end of this year, NVIDIA's market value may double again." Jackson mentioned that by releasing an unparalleled strong performance report in August and/or November, demonstrating the continued strong demand for the H100 and H200 AI GPUs globally, and actively showcasing the incredibly strong revenue potential of its profit-focused new Blackwell architecture AI GPU, NVIDIA's market value is very likely to reach the aforementioned level.

NVIDIA's newly launched AI GPUs based on the Blackwell architecture—namely B100/B200/GB200—some market research reports indicate that due to the full load of TSMC's 3/4/5nm production capacity and the longer time needed for the expansion of CoWoS advanced packaging capacity, it may not be until the fourth quarter of this year that Blackwell architecture GPUs achieve limited shipments and begin customer testing, with true mass market entry expected to wait until at least the first quarter of 2025.

Expected data compiled by Tipranks for NVIDIA shows that Wall Street analysts have an average target price as high as $138.46, with a consensus rating of "Strong Buy," and none of the analysts covering NVIDIA have given a "Sell" rating.

After conducting research recently, the Wall Street major firm Morgan Stanley has significantly raised NVIDIA's target price for the next 12 months from $116 to $144, and maintains a "Buy" rating on the company. Overall, Morgan Stanley remains optimistic about NVIDIA's stock price momentum, believing that its performance will be much stronger than the broader market, but it will still take time to emerge from the recent pullback. Morgan Stanley stock analyst Joseph Moore wrote in a recent research report: "The data points we discussed in two Asian reports, as well as our examination of the US market, indicate that demand for NVIDIA's AI GPUs in Asia remains strong at least this year." "That being said, it is clear that we are at the tail end of the Hopper architecture cycle (H100 and H200 based on the Hopper architecture), with much lower bubbles and visibility than before, considering the enthusiasm of enterprises in China and Taiwan for NVIDIA's latest Blackwell architecture AI GPUs (B100/B200/GB200 expected to ship in Q4) that we learned about after our research."

UBS recently reiterated its "Buy" rating on NVIDIA and significantly raised its target price from $120 to $150. UBS pointed out that recent market surveys show that global demand for the upcoming Blackwell series AI GPU products is "very strong." The UBS analysis team stated that based on recent demand surveys for Blackwell, NVIDIA's earnings per share could reach $5 by the end of 2025. In contrast, UBS's earnings per share expectations for NVIDIA are significantly higher than the sell-side consensus of $3.6. Another well-known institution, Keybanc, recently raised NVIDIA's target stock price from $130 to $180 and maintained an "Overweight" rating.

Relying on the "AI GPU+CUDA" moat, NVIDIA's momentum of strong performance growth may not be over yet

Top Wall Street institutions still insist on a bullish view of NVIDIA, known as the "AI leader," in the next 12 months, believing that global demand for NVIDIA's H100/H200 AI GPUs remains very strong, and the next generation of AI GPUs based on the Blackwell architecture is expected to bring significant revenue contributions, with the "CUDA software-hardware collaborative platform + high-performance AI GPU" forming NVIDIA's incredibly strong moat.

According to a report by the well-known research firm IDC, the total global investment in AI IT systems covering software, hardware, and other related services centered around artificial intelligence (AI) is only about $132.49 billion in 2022, but is expected to grow to $512.42 billion by 2027, with a high compound annual growth rate (CAGR) of 31.1%, and will focus extensively on generative AI fields similar to ChatGPT.

IDC's latest survey shows that by 2027, 45% of enterprises are expected to master and use generative AI tools to jointly develop digital products and services, aiming to double their revenue scale compared to competitors. IDC also predicts that **the global generative AI market's CAGR could reach 85.7%, with the global generative AI market size approaching $150 billion by 2027 All of this means that NVIDIA, which dominates the AI core infrastructure field, is expected to continue to benefit from this unprecedented AI boom in the coming years.

Recently, the well-known Wall Street investment firm Rosenblatt released a heavyweight research report. The core content is: based on the potential prosperity expectations of NVIDIA's software business core around CUDA, even though NVIDIA's stock price has skyrocketed since 2023, the stock price of this chip giant is expected to continue to rise in the next 12 months. If NVIDIA can generate a substantial recurring revenue scale from the layout of software business core around the CUDA platform, it will make the revenue scale of this chip giant more predictable, thereby significantly reducing the risk of revenue decline for the company. NVIDIA has been deeply cultivating in the global high-performance computing field for many years, especially its globally popular CUDA computing platform, which can be said to be an indispensable software and hardware collaborative system in the field of high-performance computing such as AI training/inference.

In addition to the huge GPU hardware revenue brought by CUDA tightly bound to NVIDIA's AI GPU, and the revenue generated by large-scale applications of CUDA in the enterprise, the software business derived from CUDA as the core is also an engine for NVIDIA to achieve huge revenue. In this report, Rosenblatt has raised its target stock price for NVIDIA in the next 12 months from $140 to an astonishing level of $200 per share, ranking it as the highest target price for NVIDIA on Wall Street