Nvidia Stock Is Rising. It Can Gain 37% From Here, Says This Analyst.

Nvidia chips are the favored choice for training artificial-intelligence models. (Courtesy NVIDIA)

Key Points

About This Summary

• Barclays analysts anticipate Nvidia will be the primary beneficiary of over $2 trillion in announced AI infrastructure spending.
• Analyst Tom O’Malley raised Nvidia’s target price to $240 from $200, indicating a 37% potential rise from current levels.
• The new target price is based on a 35-times price-to-earnings multiple, up from a 29-times multiple previously.

Nvidia stock was climbing Thursday after trading down earlier in the day, as a series of huge commitments to artificial-intelligence spending has Barclays analysts looking for strong future gains.

Nvidia shares were up 1.5% to $179.58. The stock fell 0.8% on Wednesday and has largely flatlined over the past month despite technology companies signaling massive AI investments.

Among other chip makers, Advanced Micro Devices and Broadcom were off 0.6%, clawing back heavy losses from earlier in the session.

While investors look to be rotating out of AI-exposed stocks, Wall Street is still confident on Nvidia.

Barclays analyst Tom O’Malley expects Nvidia will eventually be the principal beneficiary of more than $2 trillion in announced spending on AI infrastructure. Within that, he forecasts around $1.5 trillion will go on compute-and-networking capabilities—where Nvidia is the market leader—and it will involve the purchase of nearly 19 million graphics-processing units.

“We see this [AI spending] largely flowing into the Nvidia P&L [profit-and-loss] over the next 5+ years, moving numbers materially higher and making this the most attractive name in our space,” O’Malley wrote.

He raised his target price on the stock to $240 from $200 in a research note on Thursday, indicating a 37% rise from current levels, while keeping an Overweight rating on the stock.

The new target price is based on a price-to-earnings multiple of 35 times the analyst’s forecast for Nvidia’s earnings per share in 202, up from a 29-times multiple previously.

“We raise our multiple to reflect potential upside from continued AI momentum and DC [data center] builds,” O’Malley wrote.

Separately, AI infrastructure start-up Nscale Global Holdings said Thursday it had raised $1.1 billion from Nvidia, Dell Technologies , Nokia , and other investors as it plans to roll out data centers across Europe, North America, and the Middle East. The Series B funding round was led by a $285 million contribution from Norwegian industrial group Aker.

Write to Adam Clark at adam.clark@barrons.com