Nvidia’s (NASDAQ: NVDA) stock may have hit a bump in the road in the third quarter, dropping 2% and breaking a seven-quarter winning streak. But if you think that’s a signal to steer clear, think again.
According to analysts, the stock’s remarkable growth story is far from over.
Nvidia has still delivered a stellar performance in 2024, with shares soaring more than 150% year-to-date, including a 2.7% boost on Monday.
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NVDA stock set up for a strong finish
Ben Reitzes from Melius Research is urging investors to keep faith in Nvidia’s long-term trajectory. Despite some investor skepticism (“eye rolls” included), he’s confident the tech giant is well-positioned for a strong finish to the year.
In a note to clients, Reitzes highlighted that Nvidia is still the driving force behind the surging demand for AI, with heavy hitters like OpenAI, Microsoft, Google, and Meta relying on its graphics processing units (GPUs) for their AI-driven innovations.
“We expect things to perk up more into year-end given indications for strong AI spending on training and inferencing, still driven by Nvidia,” Reitzes wrote.
With companies accelerating the release of AI products, Nvidia is set to benefit from increased GPU usage — a key component in the AI arms race.
Is Nvidia still a bargain?
The Melius Research analyst also points to Nvidia’s valuation as a reason to remain optimistic, noting that it’s “still the second cheapest stock in our group on a [price-to-earnings-to-growth] basis.”
In a world where tech stocks can often seem overinflated, Nvidia’s stock at 1x 2025 estimates stands out as a potential bargain for long-term investors.
Eyes on Nvidia stock for 2025
Adding to the bullish sentiment, Citi analysts reaffirmed their Buy rating for Nvidia on Monday, October 7, with a steady price target of $150. Their optimism is driven by strong growth in cloud data center capital expenditures, which they expect to rise more than 40% next year.
However, it’s not all smooth sailing.
Citi analysts predict that Nvidia’s stock might stay in a tight range until the Consumer Electronics Show (CES) in January. After that, the launch of Blackwell, Nvidia’s new product line, is expected to push sales and gross margins higher by April.
While there may be a temporary dip in gross margins to around 72% in early 2025, they anticipate long-term margins will stabilize in the mid-70s once Blackwell takes hold.
The road ahead for AI and GPUs
One of the most exciting aspects of Nvidia’s future is its role in the AI market. Citi notes that AI adoption is still in its early to middle stages, with enterprise AI demand poised to skyrocket. Generative AI agents and GPU-as-a-service providers will drive this growth, though Citi emphasizes that patience is key as new business models emerge.
The shift in Nvidia’s sales mix towards the GB200 format is expected to offer better total cost of ownership (TCO) and return on investment (ROI) for enterprises. With these developments, the firm is looking to next year for significant ROI data points.
Nvidia’s short-term dip is more of a speed bump than a roadblock. With analysts still bullish on its prospects, the stock is set to remain a leader in AI and semiconductor innovation.
Nvidia shares closed at $127.72 on Monday, and in pre-market trading on October 8, they rose further to $129.79 (+1.62%).
