The AI boom is sweeping the world, and "shovel sellers" like NVIDIA are unstoppable! Bernstein is bullish on the stock, with a target price of $700.

Zhitong App has learned that Stacy Rasgon, an analyst from the well-known Wall Street investment firm Bernstein, recently stated that if investors are looking for relatively cheap investment targets in the global AI boom, the answer may be right in front of them - the AI chip leader, NVIDIA (NVDA.US). Rasgon, the Bernstein analyst, is extremely optimistic about the future trend of NVIDIA's stock price in the next 12 months, giving NVIDIA an "outperform" rating and a target price of up to $700, which means a potential increase of up to 43% in the next year.

NVIDIA is set to be the hottest investment target in the global stock market in 2023, thanks to the AI investment frenzy sparked by the emergence of ChatGPT last year. NVIDIA's performance in 2023 has been exceptionally outstanding. So far this year, NVIDIA's stock price has soared by an astonishing 240%. This achievement not only easily surpasses the S&P 500, the benchmark index of the US stock market, but also ranks first among the seven tech giants in terms of year-to-date gains. The seven tech giants in the US stock market, known as the Magnificent Seven, include Apple, Microsoft, Alphabet-C, Tesla, NVIDIA, Amazon, and Meta Platforms.

In a recent report, Bernstein analyst Rasgon wrote: "The company's stock price (year-to-date) has risen by an astonishing 240%, making it the largest-scale arms dealer in the global AI wave, surpassing all markets and AI peers." "However, even based on such huge profit expectations, the stock price performance can be said to be disappointing, as it actually experienced a significant pullback last month after another sharp rise."

He pointed out, "With the vigorous development of generative AI, NVIDIA's expected profits this year have doubled, while the price-earnings ratio has been compressed by nearly two-thirds during the same period."

Rasgon believes that NVIDIA's current valuation is attractive, and the expected price-earnings ratio of the stock is still relatively optimistic. He emphasized that this data is the lowest valuation since the cryptocurrency crash at the end of 2019. Rasgon wrote, "Nowadays, NVIDIA is actually the cheapest target among 'AI narrative' stocks, even Intel has become more expensive!"

He stated that the institution understands why people are cautious about NVIDIA's stock now, as the valuation of NVIDIA has risen so rapidly, raising concerns about how long NVIDIA's growth momentum can be sustained. Rasgon wrote: "The sell-side market believes that next year's earnings per share will be around $20, while we believe that the buy-side market's expected earnings per share may be close to $25 (which actually seems very reasonable)." "However, investors seem to be concerned that the expected earnings per share of $25 may be downgraded by $15 in a year."

However, he still maintains confidence and points out that NVIDIA executives are "quickly updating their product portfolio" and launching AI chips based on new architectures, emphasizing that these new architectures should be able to support increasingly higher prices.

In terms of Wall Street stock ratings and price expectations, data compiled by investment research platform Seeking Alpha shows that Wall Street analysts have a consensus rating of "buy" for NVIDIA, with an average target price of $651.83, a historical high, implying a potential upside of 33% in the next 12 months, with the highest target price reaching $1100.

The golden age of NVIDIA may have just begun

In the eyes of many skeptical investors, artificial intelligence is just another hype, and once the excitement fades, the overvaluation of technology giants like NVIDIA will plummet. However, the bullish forces clearly do not believe in this view.

For example, Wall Street's major bank Goldman Sachs believes that artificial intelligence is expected to boost global productivity, and some investment institutions expect AI to usher in a new era of productivity in the 2020s and 2030s.

NVIDIA, on the other hand, stands at the forefront of the transition of human society to the AI era, providing essential infrastructure for AI solutions through its almost monopolistic data center hardware products, and seizing opportunities.

As the world gradually enters the AI era and the process of everything being interconnected accelerates, it means that the global demand for computing power is experiencing explosive growth, especially for AI training and inference-based AI sub-tasks that involve a large number of matrix operations and require high hardware performance. Therefore, NVIDIA GPUs, which have a large number of computing cores, can simultaneously execute multiple high-intensity AI tasks, and are extremely proficient in parallel computing, will be the most core hardware in the field of AI for a long time to come.

In recent years, AI technology has made continuous breakthroughs, and the integration of AI and applications has become more perfect. Enterprises around the world are competing to layout advanced technologies represented by artificial intelligence, helping enterprises achieve new business empowerment, optimize decision-making processes, and improve operational efficiency, thereby giving rise to more diverse and customized demands for artificial intelligence. The latest forecast data from IDC shows that the global total investment in artificial intelligence IT in 2022 will be $128.8 billion, and it is expected to increase to $423.6 billion in 2027, with a five-year compound annual growth rate (CAGR) of approximately 26.9%. According to a recent research report released by market research firm Technavio, the market size of AI application chips is expected to explode at an astonishing compound annual growth rate of 61.51% between 2022 and 2027. The report covers chip categories including customized ASICs, GPUs, CPUs, and FPGAs, which are the underlying chips.

At the "Advancing AI" conference, AMD (AMD.US), one of the competitors of CPU and GPU industry giants, significantly raised its global AI chip market size forecast for 2027 from the previous estimate of $150 billion to $400 billion. The expected market size for the AI market in 2023 is only around $30 billion.