Nvidia stock jumps on Wall Street praise, bolstering the Club case in the chipmaker

Wall Street analysts on Thursday widely cheered Club holding Nvidia ‘s (NVDA) fiscal year 2023 fourth-quarter results, prompting an avalanche of price-target increases and a new buy rating from once-skeptical Goldman Sachs. The overwhelmingly positive reaction underscores the quality of Nvidia’s business fundamentals, along with the opportunity we’ve been touting for the company to grow on the back of its maturing artificial intelligence (AI) capabilities. Shares of Nvidia surged nearly 14% Thursday, to over $236 apiece, bringing the stock’s year-to-date gains to roughly 62%. The view from Wall Street In the 21 notes from major research shops the Club reviewed Thursday, 18 analysts boosted their price targets following Nvidia’s better-than-expected results Wednesday evening — ranging from the high end of $320-per-share at Rosenblatt Securities all the way down to $200 apiece at Deutsche Bank. Fourteen of those 18 analysts rate the stock a buy, or buy equivalent, compared with four who maintain hold ratings. But Goldman Sachs was the only bank to raise its stock rating on Nvidia, to buy from neutral, making its research note on the chipmaker Thursday’s most notable. In addition to now recommending clients buy Nvidia stock, Goldman boosted its 12-month price target to $275 a share from $162. That implies a nearly 33% upside from where the stock closed Wednesday, at $207.54 a share. “The combination of positive estimate revisions and a potential expansion in the stock’s multiple — consistent with historical recovery phases — will drive continued outperformance in the stock,” Goldman analysts wrote. The analysts acknowledged their prior caution around Nvidia had been “wrong,” but said the upgrade was driven by signs of accelerated adoption of AI, pricing power and tight expense management. Meanwhile, analysts at investment bank Stifel were among those who maintained their hold rating on Nvidia’s shares. They said they “continue to view NVDA as amongst the best positioned to benefit from accelerated AI-based investment,” but expressed concerns about the stock’s valuation. Its forward price-to-earnings ratio of 45-times is above the five-year average of 42-times, according to Stifel’s calculations Thursday morning. Stifel, nonetheless, raised its price target on Nvidia to $225 per share, up from $207, on the back of elevated revenue and earnings estimates for fiscal years 2024 and 2025. Big picture NVDA 1Y mountain Nvidia’s stock performance over the past 12 months. Not only did Nvidia beat Wall Street’s estimates for its fiscal fourth-quarter sales and earnings, the company’s current-quarter guidance came in stronger than expected. A key factor behind the chipmaker’s favorable outlook is management’s expectation that cloud and gaming revenues will grow quarter-over-quarter. Moreover, Nvidia expects growth in its data center business — home to its cloud operations and AI-related chips — to accelerate throughout the fiscal year, CFO Colette Kress said Wednesday. “Looking forward, the risks to [gaming and data center] are cleared and we believe this remains the best way to gain exposure to the growth in AI,” analysts at Barclays wrote in a note Thursday. The firm has an overweight, or buy, rating on Nvidia and a $275-per-share price target. Nvidia CEO Jensen Huang on Wednesday said AI is at an “inflection point,” with viral chatbot ChatGPT demonstrating the potential of the technology, known as generative AI. OpenAI’s ChatGPT — in which Club holding Microsoft (MSFT) is a major investor — is a large language model that generates distinct, human-like text responses to user queries. Nvidia’s graphics processing units (GPUs) were used to train and run ChatGPT and can be applied to other large language models. “Enterprises in just about every industry are activating to apply generative AI to reimagine their products and businesses,” Huang said. “The level of activity around AI, which was already high, has accelerated significantly.” Bottom line We’ve been long-term Nvidia investors on our belief in the growth potential of its cloud and software business, which has only been bolstered by the company’s innovations in the realm of AI. Those prospects were on full display Wednesday with the chipmaker’s outsized quarter and guidance. And Wall Street clearly took note, too. Last year proved to be a challenging one for the semiconductor industry — prompting the Club to reduce our exposure to high-multiple technology stocks like Nvidia — but the sector has rebounded in 2023, with the generative AI buzz a tailwind in particular for Nvidia. And evidence that the darkest clouds over gaming appear to have dissipated is another favorable takeaway. Despite our optimism on Nvidia’s growth potential, we seldom add to a stock amid a huge rally like Thursday’s. That’s why we’d want to see some pullback before adding to our position. (Jim Cramer’s Charitable Trust is long NVDA, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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