Nvidia’s CEO is optimistic about contributing to the construction of data centers worth a trillion dollars.
Nvidia, identified by the ticker NVDA, has experienced significant volatility over recent months. After reaching a new all-time high in June, the stock of the advanced semiconductor chip supplier saw a more than 30% decline. The share price later rebounded, underwent another sharp decline, and then returned to reach a new peak. This volatility is attributed to robust sales and earnings growth coupled with high investor expectations, juxtaposed against a high valuation.
Analyst Ben Reitzes from Melius Research believes the bullish sentiment among investors is justified and predicts that Nvidia’s stock can increase by an additional 25% from its current level. He suggests investors purchase the stock, setting a price target of $165 per share.
Reitzes’ optimistic outlook is based on his conviction that Nvidia has established a long-lasting competitive advantage. In a research note reported by Barron’s, he stated that Nvidia’s significant accomplishment is creating an infrastructure that operates across all major cloud platforms and can be rapidly monetized.
This competitive advantage is bolstered by a moat formed around Nvidia’s CUDA software program kit. As the company launches new, more powerful chips such as the latest Blackwell GPU (graphics processing unit), the proprietary parallel computing platform enables clients, regardless of size, to continue utilizing previously acquired Hopper series chips. This aids in accelerating the development of their artificial intelligence (AI) initiatives.
This creates a strong customer retention for Nvidia, allowing clients to increase computational power for AI training while still benefiting from investments in earlier GPU products. The demand for AI development remains substantial. During a recent podcast interview, Nvidia CEO Jensen Huang highlighted that the entire computing technology stack is undergoing reinvention and emphasized the necessity to modernize data centers valued at a trillion dollars.
Nvidia is well-positioned to capture a significant portion of this capital expenditure. This underpins Reitzes’ view that the stock has ample potential for further growth, making it an appealing investment opportunity.
