Rare Scene: Wall Street Expected to Fall Behind NVIDIA's Performance! Is the "Most Important Stock on Earth" Still on Fire?

NVIDIA (NVDA.US), the AI chip leader and dubbed by Wall Street giant Goldman Sachs as the "most important stock on Earth," is arguably the most expensive stock among the components of the S&P 500 Index, with a stock price equivalent to a whopping 23 times the company's expected sales in the next 12 months. However, despite NVIDIA's high valuation, there remains a question that even Wall Street finds difficult to answer: in the era of booming artificial intelligence, how spectacular will the actual revenue scale of this chip giant with a market value exceeding $3 trillion be in the coming years? This is also a key factor driving Wall Street analysts to generally raise NVIDIA's target stock price, with NVIDIA briefly holding the title of "world's highest market value listed company" last week, and its market value may potentially surge towards the $5 trillion mark.

This question, covering NVIDIA's stock, is unclear even to Wall Street analysts covering NVIDIA's stock, and even to NVIDIA executives. NVIDIA's AI GPUs such as H100/H200/GB200 are essential core hardware that drives heavyweight artificial intelligence applications like ChatGPT and Sora, hence NVIDIA's potential revenue scale in the "AI shovel era" is too strong, making it rare for Wall Street analysts to completely keep up with the pace of growth, rendering their forecasting work increasingly difficult.

NVIDIA's total revenue in Q1 of the 2025 fiscal year increased by 262% year-on-year to $26 billion, setting a historical record for total revenue, far exceeding Wall Street analysts' general expectations for four consecutive quarters, and the total revenue growth rate year-on-year is NVIDIA's third consecutive quarter with a growth rate exceeding 200%. With the strong demand for H100/H200 GPUs, NVIDIA's Q1 data center revenue increased by 427% year-on-year to $22.6 billion, reaching a historical high. It is worth noting that NVIDIA exceeded the expectations of the aforementioned quarters, which were generally predicted by Wall Street analysts after continuous upward revisions of revenue expectations before NVIDIA's performance announcement.

For most individual and institutional investors, they generally believe that NVIDIA's revenue prospects are extremely optimistic, but it is difficult to measure the specific expected revenue scale. So, how should investors calculate whether NVIDIA's valuation is too expensive?For over a year, the global frenzy surrounding the deployment of artificial intelligence technology by enterprises has sparked an "explosive growth" in demand for NVIDIA's AI GPUs, making even the continuously raised quarterly financial forecasts by Wall Street analysts a laughing stock. Analysts are not "conservatively" fabricating data; they, like with other companies, gather clues from the management and core customer base of NVIDIA (such as Amazon AWS, Microsoft, Google, etc.).

However, even senior management at NVIDIA finds it difficult to predict how this chip giant's quarterly revenue will fare in the next three months or so—NVIDIA typically provides a revenue range for the next quarter in its quarterly performance, and the procurement scale of NVIDIA's AI GPUs by cloud giants like Amazon AWS may fall far short of the pace of demand growth from cloud computing customers.

Since NVIDIA's quarterly revenue began to explode in the fiscal year ending in April 2023, the company's actual final revenue has exceeded the median value of both the company's management forecast and Wall Street forecast by 13%, more than twice the average level of the past decade. Institutional compiled expected data shows that when NVIDIA announced its performance in August last year, actual revenue exceeded the median forecast by 23%, the largest margin since at least 2013.

In terms of stock price, Wall Street's target price for the stock also lags far behind NVIDIA's stock price surge, with NVIDIA's stock price skyrocketing globally due to the unprecedented AI frenzy. Following a 240% surge in 2023, it has surged 170% since 2024.

Looking at a longer time frame, NVIDIA's stock price has soared over 1000% since October 2022, becoming the world's highest market value listed company last week, claiming the title of "Global Stock King" for the first time. After this 1000% surge in the AI frenzy, global funds may return from the fervent irrational chase to rational thinking, possibly indicating a short-term downward adjustment or consolidation of NVIDIA's stock price, but it is difficult to change NVIDIA's stock price "long bull trend" in the AI era.

"Wall Street Ballparking" Far Behind NVIDIA's Performance

There is a popular saying on Wall Street: Our Ballparking is far behind NVIDIA's performance. "Ballparking" can be colloquially translated in Chinese context as "rough estimate" or "preliminary data forecast." This is an informal colloquial expression commonly used to refer to a quick, rough estimate of something rather than an accurate measurement.

Brian Colello, an analyst from Morningstar, stated that the reason NVIDIA's performance modeling is so difficult is partly due to the fact that when demand is strong, supply—the most uncertain dynamic variable, makes this chip giant unique and particularly difficult to predict compared to peers like AMD, Intel, etc.**

It is worth noting that Colello is a very rare Wall Street analyst who is bearish on NVIDIA's future market trends. Last month, this analyst raised NVIDIA's target stock price from $91 to $105. As of last week's closing of the US stock market, NVIDIA's stock price was around $126.

Although Colello holds a bearish view, mainly based on the risk of a pullback due to NVIDIA's high valuation, he is very optimistic about NVIDIA's future performance growth prospects. Assuming NVIDIA's ability to increase supply steadily improves, he expects NVIDIA's quarterly revenue increment to conservatively reach $4 billion, thereby roughly estimating the sales for the next quarter.

"I am not the only analyst who has raised the target stock price or fair value, nor am I the first analyst to be surprised by the continuous revenue far exceeding expectations from a year ago," Colello said. "It's interesting, rewarding, and of course, challenging."

Colello is not the only Chinese Wall Street analyst who has raised performance expectations and target stock prices. Last Friday, Melius analyst Ben Reitzes raised NVIDIA's target price for the fifth time this year, significantly increasing it from $125 to $160, which means the stock may rise by 26% from last Friday's closing price within the next 12 months.

In the latest report, Wedbush Securities senior analyst Daniel Ives pointed out that he believes that in the next year, NVIDIA, Apple, and Microsoft will become the focus of the technology industry's $4 trillion market value competition, and NVIDIA may be the first giant to reach a $4 trillion market value. Ives emphasized that as the Fourth Industrial Revolution advances, the demand for these chips from enterprises and consumers is growing, and NVIDIA's AI GPU chips are essentially the new gold or oil in the tech sector.

After a short-term adjustment, will NVIDIA gather strength to challenge a $5 trillion market value?

Wall Street analysts who are bullish on NVIDIA's stock price have emphasized that NVIDIA will continue to rise, possibly reaching $150 or even $200 within the year—meaning NVIDIA's market value will surpass the $5 trillion mark. Since the beginning of this year, the average target price of stocks set by Wall Street analysts has also fallen far behind NVIDIA's stock price surge, forcing all analysts covering NVIDIA's stock to continuously raise their target prices.

Although NVIDIA's stock price experienced panic selling due to the expiration of stock options on "Triple Witching Day" last Friday, as well as significant selling pressure from retail investors taking profits leading to a sharp drop on Thursday, analysts at Bank of America believe that the stock still represents a very attractive investment opportunity. Bank of America emphasizes that any degree of decline in NVIDIA's stock should be seen as a good opportunity to buy more stocks at a low point.

Bank of America analysts wrote in their latest report that investors should continue to be optimistic about this chip giant that is driving the prosperity of AI. Bank of America reiterated its "buy" rating on NVIDIA and a target price of up to $150, implying a potential upside of about 15% in the next 12 months.

In the report, Bank of America emphasized that the hardware deployment cycle of Generative AI (GenAI) could last up to 3-5 years, but it is currently only in the second year. It is estimated that NVIDIA has an opportunity of up to $300 billion annually to leverage, which is roughly three times the company's expected revenue this year. Bank of America also expects NVIDIA's next-generation AI GPU based on the Blackwell architecture to bring significant revenue contributions. Bank of America also refutes the "AI bubble theory" derived from the "Internet bubble period" in 2000, emphasizing that unlike the "Internet boom period" which relied on high-risk debt financing, the deployment of Generative AI is a competition among some of the most well-funded leaders in the technology sector, such as cloud computing giants.

As billionaire investor Stanley Druckenmiller stated, from the perspective of the long-term development of artificial intelligence technology, the value of NVIDIA, perhaps considered the "most important stock on Earth," may still be underestimated.

Recently, the well-known Wall Street investment firm Rosenblatt released a heavyweight research report, with the core content focusing on the potential prosperity expectations of NVIDIA's software business based on CUDA. Despite the skyrocketing stock price of the AI chip leader NVIDIA in the past year, Rosenblatt expects the stock price of this chip giant to continue to rise in the next 12 months, with NVIDIA's stock price expected to be 50% higher than the current level. This is the view of Rosenblatt's chip industry analyst Hans Mosesmann, who significantly raised the firm's 12-month target price for NVIDIA from $140 to an astonishing $200 per share in this report, ranking it as the highest target price for NVIDIA on Wall Street.

Rosenblatt's latest bullish forecast also implies that NVIDIA, recently crowned the "global stock market new king" as the first company to achieve the title of "the world's highest market value listed company," may reach a total market value of $5 trillion within the next 12 months. Looking ahead, analyst Mosesmann stated that NVIDIA's true source of strong profits lies not only in its AI hardware infrastructure focused AI GPU products but also in NVIDIA's software business, led by the widely popular CUDA software-hardware collaborative platform. The combination of "CUDA+AI GPU" forms NVIDIA's incredibly strong moat.

If NVIDIA can achieve a substantial recurring revenue scale from its software business layout centered on the CUDA platform, it will make the chip giant's revenue scale more predictable, significantly reducing the risk of revenue decline for the company. NVIDIA has been deeply involved in the global high-performance computing field for many years, especially with its CUDA computing platform that has become popular worldwide, making it the preferred software-hardware collaborative system for high-performance computing in areas such as AI training/inferenceThe CUDA computing platform is a parallel computing acceleration platform and programming assistance software developed exclusively by NVIDIA, allowing software developers and engineers to use NVIDIA GPUs for accelerated parallel general-purpose computing (only compatible with NVIDIA GPUs, not compatible with mainstream GPUs such as AMD and Intel).

CUDA can be said to be a platform that ChatGPT and other generative AI applications rely heavily on, with its importance equal to the hardware system, being crucial for the development and deployment of large AI models. With extremely high technological maturity, absolute performance optimization advantages, and extensive ecosystem support, CUDA has become the most commonly used and widely popular collaborative platform in AI research and commercial deployment.

According to information from the NVIDIA official website, using NVIDIA GPUs for CUDA general acceleration computing programming and some basic tools is free, but for CUDA enterprise-level large-scale applications and support (such as NVIDIA AI Enterprise), or when leasing NVIDIA computing power on cloud platforms (such as Amazon AWS, Google Cloud, Microsoft Azure) for developing AI systems, a subscription-based CUDA microservice development for AI systems may require additional fees. In addition to the huge GPU hardware revenue brought by CUDA's strong ties to AI GPUs, and the revenue generated by CUDA's enterprise-level large-scale applications, the software business derived from CUDA is also an engine for NVIDIA to achieve huge revenue.

Last month, Beth Kindig, a technology industry analyst from the well-known investment firm I/O Fund, also expressed great optimism about NVIDIA's software business revenue expectations centered around CUDA. Analyst Kindig from I/O Fund gave a more aggressive long-term market value outlook for NVIDIA, stating in a research report released last month that by 2030, NVIDIA's stock price is expected to soar by over 200% from current levels, with a market value potentially reaching $10 trillion (NVIDIA's current market value is around $3.2 trillion).

Kindig also predicted in the report that by 2027, the total potential market size of the global AI data center market will reach $400 billion, and by 2030, it will reach $1 trillion, with the data center AI chip market expected to be mainly dominated by NVIDIA, rather than its largest competitors AMD or Intel. "NVIDIA will take the largest share," Kindig stated. "This is largely due to the CUDA ecosystem and the powerful performance of NVIDIA's AI GPUs.

What level of valuation can be considered reasonable?

Of course, many traders are simply buying the stock based on NVIDIA's momentum and technical strength. NVIDIA has surged by 170% so far this year, surpassing Microsoft (MSFT.US.) last Tuesday and briefly becoming the world's most valuable company with a market value of $3.34 trillion. Analysis by Bank of America of EPFR Global data shows that as of June 19th, this rally has driven various types of tech funds to receive a record $8.7 billion in funding support last weekHowever, following the "Three Witch Days", NVIDIA's stock price fell by about 6.7%, evaporating more than $200 billion in market value.

For analysts who tend to focus on discounted cash flow models, these models have greater variability than in the past, posing significant challenges in bridging the gap between NVIDIA's performance expectations and actual results.

Data compiled by institutions shows that over the past five quarters, Wall Street analysts' average positive deviation in revenue forecasts for NVIDIA has been as high as 12%. Among S&P 500 index component stocks with an average quarterly revenue of at least $5 billion over the past five quarters and tracked by at least 20 top analysts, NVIDIA ranks third in deviation, with a market capitalization significantly higher than other index components.

Wall Street Struggles to Evaluate NVIDIA's Valuation

Therefore, as NVIDIA's AI GPU business thrives and major customers like Amazon AWS and Microsoft commit to investing more in computing hardware over the next few quarters, investors face the main question: for a stock with profit and revenue growth rates far exceeding those of large-cap peers, what is a reasonable price to pay?

Based in Santa Clara, California, NVIDIA stands at the forefront of a massive technological revolution, with global investors betting real money on NVIDIA becoming a leader in the AI era. Wall Street expects NVIDIA's revenue to at least double in the 2025 fiscal year, reaching $120 billion, and is expected to further increase to $160 billion in the next fiscal year, possibly even reaching $200 billion. In comparison, Microsoft, with a market cap also exceeding $3 trillion, is expected to grow its revenue by only around 15% in the current fiscal year.

According to current Wall Street expectations, NVIDIA's revenue this quarter is expected to be around $28.4 billion, with profits expected to reach as high as $14.7 billion, representing a 137% and 111% increase from the same period last year, respectively. Meanwhile, Microsoft's revenue is only expected to grow by about 15%, and Apple's expectations are around 3%.

While NVIDIA's valuation multiples are quite high, considering NVIDIA's expected performance growth, especially as valuations become increasingly lower under strong EPS support, the previously seemingly "sky-high" valuation now appears more reasonable. In fact, according to statistics from LSEG Datastream, NVIDIA currently has a forward P/E ratio of around 45x, only slightly higher than its 5-year average P/E ratio of 41x.Despite NVIDIA's price-to-earnings ratio being as low as 25x earlier this year, significantly lower than the staggering over 84x valuation about a year ago.

However, the forces cautious about NVIDIA's stock price are gradually growing, mainly concerned that the potential for NVIDIA's future performance to exceed expectations may disappear. According to Michael O'Rourke, Chief Market Strategist at Jonestrading, a bigger concern is that the extent to which NVIDIA surpasses Wall Street's growth expectations may inevitably begin to weaken due to the company's increasingly large scale, making it more difficult to prove the sustainability of the stock's continued skyrocketing trend.

"That's where the risk lies," O'Rourke emphasized. "You pay a high price for a company with a large market capitalization, and the extent to which the company's performance exceeds expectations may see a significant decline, and this trend may continue."

Analyst Gil Luria from D.A. Davidson stated that NVIDIA has a "truly revolutionary" chip product and has achieved "unprecedented performance growth." However, he rates the stock as "neutral" with a target price of only $90, ranking as the most pessimistic on Wall Street.

Looking ahead in the coming years, analyst Luria expressed doubts about NVIDIA's core customer base, such as computing giants like Amazon AWS, continuing to spend enough money sustainably to drive strong growth expectations for the company on Wall Street. "The caution towards NVIDIA comes from long-term performance prospects," Luria said. "This unparalleled performance may be difficult to maintain."