AI chip giant Nvidia’s stock price rose 4.14% on the 21st, closing at $143.71, and its market value surpassed $3.5 trillion for the first time, becoming the second company in history to reach this milestone, closely following Apple, whose market value is about $3.6 trillion. What factors are driving Nvidia’s strong performance?
Nvidia’s market value surpasses $3.5 trillion
TSMC: Nvidia orders filled until next year
Bank of America raises Nvidia’s target price to $190
Benefiting from the rapid growth of the AI industry, semiconductor leader TSMC announced impressive third-quarter financial results last week. Chairman Mark Liu expressed confidence in the next five years, emphasizing the real demand for AI, which motivated the stock price to reach a new high. At the same time, Nvidia, an important customer of TSMC, also benefited from this positive news, leading to an increase in its stock price and a new high in market value on the 21st.
According to Google Finance data, Nvidia’s stock price rose against the trend on the 21st, in sharp contrast to the decline of the S&P 500 and Dow Jones Industrial Average. It rose by 4.14%, closing at $143.71, and its market value surpassed $3.5 trillion for the first time, reaching $3.5252 trillion, becoming the second company in history to reach this milestone, closely following Apple, whose market value is $3.5955 trillion, with a difference of only $70.3 billion.
The strong performance of Nvidia’s stock price may be related to the information revealed during TSMC’s earnings conference last week. TSMC stated that Nvidia’s orders are filled until 2025, and with the expected mass shipment of the new product GB200 by the end of this year, the revenue and profits are expected to grow significantly by 2025. This significant positive news immediately boosted the stock prices of both TSMC and Nvidia, as well as related supply chain stocks.
Morgan Stanley analyst Joseph Tsai pointed out that with the optimistic outlook for GB200 chip sales, the revenue, profits, and stock prices of the AI supply chain are expected to reach new highs, becoming a group of stocks to watch in the future. This also reflects the market’s optimistic attitude towards Nvidia’s new generation AI processor, Blackwell.
Another factor driving Nvidia’s stock price increase may be the upcoming release of Tesla’s financial report on Wednesday. The market’s anticipation of this report may have led to an early increase in Nvidia’s stock price, as Tesla relies on Nvidia’s GPUs for AI computation to train its assisted driving system and its in-development humanoid robots. If the future outlook revealed in the financial report is similar to TSMC’s expectations, it may further boost Nvidia’s stock performance.
In addition, analysts have raised Nvidia’s target price, which is another reason for the stock price increase. Susquehanna analyst Christopher Rolland maintained a positive rating on Nvidia on Monday and reiterated a target price of $160. He pointed out that:
Bank of America also raised its revenue and earnings per share (EPS) forecasts for Nvidia for the next three years and increased the target price by about 15% to $190, reiterating a “buy” rating. With the latest closing price of $143.71, Nvidia has a potential upside of up to 32.2%.
The key reasons for Bank of America’s upward adjustment of Nvidia’s target price include:
Consolidation of the leadership position in the AI field: Nvidia’s market share in the AI market reaches 80% to 85%, and the potential market size (TAM) of the AI industry exceeds $400 billion, indicating huge growth opportunities.
Strong AI demand: Strong demand for AI and large language models, coupled with improved visibility of CoWoS and HBM supply, drive future revenue and EPS growth.
High free cash flow: Nvidia’s free cash flow profit margin exceeds 45% to 50%, approximately twice the average level of other major US tech giants.
Attractive valuation: Nvidia’s price-to-earnings growth ratio (PEG) is 0.6 times, much lower than the average of 1.9 times for other US tech giants.
Future market potential: Bank of America predicts that the AI accelerator market will grow to $280 billion by 2027 and exceed $400 billion in the future.
With the official shipment of Blackwell and successful market acceptance leading to an increase in Nvidia’s gross profit margin, Nvidia’s market value is expected to surpass Apple’s once again.